Gilbert town manager warns budget is eroding

Gilbert's slowing economy is making planning difficult, Town Manager George Pettit said. "Our base budget is eroding as we speak today," Pettit said during a Gilbert Chamber of Commerce luncheon on Wednesday.

Single-family residential development - what Pettit considers the initial barometer for the town's economy - has slowed drastically in the last few months. The town relies heavily on sales taxes to fill its coffers, and nearly 40 percent, $16 million, of that comes from construction.

"The problem with that right now, and where we are right now, is that about 65 percent of that $16 million is directly tied to single-family home developers," he said.

The slumping housing market's drain on sales taxes, coupled with slower-than-expected development of major retail projects, such as SanTan Village and the Santan Motorplex auto mall, will make it difficult for town officials to make long-term plans when it comes to funding capital projects.

"As sales tax becomes volatile and people aren't buying cars or they aren't buying houses, that's going to be a problem," Pettit said.

Despite the cheerless forecast, Gilbert's economy is still growing, though not as quickly as town officials and business leaders had hoped.

"I think it's something to not worry about," said Linda Stanfield, Gilbert Chamber of Commerce chairwoman. "We had this wonderful boom and got lucky to have that. But we knew that wasn't going to last forever."

But many in the business community are concerned anyway, she said.

"And I believe consumers are concerned, too," Stanfield said. "It is concerning when you see empty stores, not there anymore and not being filled."

The housing market slowdown was first seen in the West Valley at least a year ago, Pettit said. But the effects were "masked" somewhat in Gilbert due to large projects, such as the shopping mall, auto mall and Banner Gateway Medical Center, all of which opened in 2007.

"It is going to be an adjustment," Stanfield said. "We should have known all this. We were told about this. Like (Pettit) said, the west side had it about a year ago, and we're now experiencing it here."

The auto mall was expected to have four dealerships open by the end of this year, but has only two, and SanTan Village is smaller than originally planned.

Mall developer Westcor has recently slowed plans on building out the mall, Pettit said.

"When we were talking originally with Westcor, and we had a completely different economic environment, they were talking one to three years," Pettit said.

New plans call for the mall to be completed in three to five years, he said.