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Proposition 402 Questions and Answers

Proposition 402 - Potential Expenditure Reductions (April 19 Report to City Council)
(pdf / 1.4MB / 17pgs)

May 16, 2006 Ballot Measure Proposing an
Adjustment to the Base Expenditure Limit for the City of Scottsdale:

Questions and Answers

Scottsdale voters will decide May 16 whether to adjust the city’s “base expenditure limit.”

Changing Scottsdale’s base limit will not increase taxes. The proposed change will allow the city to meet current demands for services and programs, using revenue it already receives.

Without the adjustment, the city will have to cut services and programs from next year’s budget and cut more in later years.

The following questions and answers provide a summary of key information regarding Scottsdale’s ballot proposal and background on base expenditure limits. For more information, please call the Communications and Public Affairs Office at 480-312-2335.

Would this adjustment increase taxes or create new taxes?

No. It would only allow the city to spend the revenue it now collects to provide city services and programs at their current levels.

What is the amount of the adjustment?

The ballot question will ask voters to increase an expenditure “base” for the 1979-80 budget year by $12 million. If approved, the state will update this amount for 27 years of inflation and population growth, which will add an estimated $79 million to Scottsdale’s 2006-07 expenditure limit. The final amount is based on formulas set by state law.

This new limit would not obligate the city to spend $79 million more. The City Council is required to approve a balanced budget and would continue to set the amount of spending each year.

Why is Scottsdale proposing this amount?

The amount is based on the estimated cost to continue current city services – including programs funded by a 2004 voter-approved public safety sales tax. This amount also should allow the city to continue the current level of services for the foreseeable future.

Why is the city proposing a change to the expenditure limit now?

The main factors driving the city’s request for a change in the limit include:

(a)    Added revenue from a public safety tax. Voters in 2004 passed a 0.1 percent sales tax dedicated to fire, police and other public safety services. The current limit does not account for this new revenue source. Raising the base will assure that the city can continue to use these funds for a higher level of public safety services.

(b)    Voter approval of a bond program in 2000. These bonds cover construction costs for new, renovated and expanded city facilities. However, the city must use other revenue to pay continuing staffing, operating and maintenance costs for the new facilities. Scottsdale has adequate revenues to cover the operating costs, but will not be able to spend the dollars without raising the base expenditure limit. Examples of the bond projects include the new McDowell Village Senior Center, the Central Arizona Project Basin Sports Complex, the McDowell Mountain Ranch Park and Aquatic Center, expansion of the Arabian Library, renovations to aging parks and neighborhood traffic control programs.

(c)    Investments in technology. The city is upgrading many of its key computer and technology systems. These include systems for dispatching and communicating with police officers, managing police records and data, processing water, refuse and recycling bills, issuing business licenses and tracking sales tax payments. Existing revenues fund these capital, maintenance and operating costs. The city’s ability to spend these revenues could be limited without a base adjustment.

Would a base adjustment remove other limits that affect Scottsdale’s budget?

No. All other limits on the city budget, including the state’s requirement that cities must pass balanced budgets, would continue.

Has the City of Scottsdale previously made adjustments to its base?

Yes. Scottsdale voters have previously approved two adjustments:

    In 1982, voters approved a “Capital Outlay Exclusion” for expenditures for land, buildings and construction. Because of this exclusion, the city’s investments in facilities and land do not fall under the expenditure limit. For example, the limit does not affect acquisition of land using voter-approved sales taxes dedicated to the McDowell Sonoran Preserve.

    In 1998, voters approved an adjustment of $12.5 million to the base. The approval allowed the city to continue using existing revenues to fund new programs and improvements, including: operation of the new Water Campus, development of new water sources, providing transit services such as Dial-a-Ride and upgrading signal and traffic coordination systems.

What is the history behind the base expenditure limit?

In 1980 Arizona voters passed a State Constitutional Amendment setting expenditure limits for cities and towns. The limits are tied to the amount each city spent in a “base” year – the 1979-80 budget year. Each year the state adjusts the expenditure limit for each city according to this base, adding dollars to account only for inflation and population growth, not for new or enhanced services or any unique needs.

However, the State Constitution allows local voters to change the base if they wish to increase expenditure limits to meet local needs.

Have other Arizona cities made changes to their expenditure limits?

Yes. Voters in most Arizona cities – 76 in all – have approved changes in expenditure limits since the limits took effect for the 1979-80 budget year. Phoenix, Chandler, Gilbert, Glendale, Mesa, Tempe, Tucson, and Flagstaff are among the cities where voters have approved changes. In many cities, voters have approved changes more than once.