Critics claim Scottsdale's purse strings loose

Posted on June 05, 2007 | Type: In the News
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Scottsdale's plan to offer employees up to 11 percent raises next year is a driving force behind city projections that show spending increases will far outpace revenue and population growth in the coming years.

The proposed 2007-08 budget is expected to be approved by the City Council today, with two council members likely voting against the $1.4 billion spending plan because of the 6 percent across-the-board cost-of-living raises that when combined with

5 percent merit raises push the salary increases into double digits.

The raises and five-year financial projections sparked philosophical debates over four months of budget hearings about the growth of government, appropriate employee compensation and the future of Scottsdale's finances.

Scottsdale has a healthy reserve in its General Fund, the account that pays for city services, programs and salaries. This year its about $42 million, even with Scottsdale collecting less city sales tax than it predicted and having more employees per capita than any major city in the Valley.

But a review of the city's five-year projections show a dramatic increase in city spending each year that far exceeds the city's projected increase in revenue collections. Next year, for instance, General Fund spending is projected to increase by 7.7 percent, with revenue lagging behind at 5.6 percent. In real numbers, new spending is projected to be $2.5 million greater than new revenue.

Scottsdale is projected between 2006 and 2011 to increase its spending by $92.6 million, or 45 percent. Revenue, on the other hand, is predicted to increase by $56.1 million, or 21 percent.

And this while the population during the same period is projected to increase just 7.3 percent.

The result, according to forecasts, means the council will no longer have access to extra cash for such things as an arts center renovation, WestWorld improvements and the acquisition of land for a new fire station, which were included in the budget.

The primary reason for these figures are personnel costs, which will account next year for 73 percent of the total General Fund budget. The cost-of-living and merit raises next year will cost $10.1 million. Another $3.6 million will be spent on the hiring of 72 new employees, plus the city will pick up $2 million to offset rising employee health and benefit costs.

My concern is were building up a permanent overhead on the employment compensation side that's not going away and will become more of a burden, said Councilman Jim Lane, who along with Councilman Ron McCullagh say they will vote against the budget as proposed.

For Scottsdale, the average annual cost-of-living raise since 2002-03 has been 2.92 percent, while the average U.S. Consumer Price Index was 3.16 percent. The index measures changes in costs of goods and services.

The 6 percent cost-of-living raise proposed is well above the current Consumer Price Index, which has been 2.5 percent since April 2006.

This is a windfall for government employees and taxpayers are picking up the tab, said Darcy Olsen, president of the Goldwater Institute, a conservative think tank. Why don't they just throw in the keys for a new Jaguar while they are at it?

Dawn McLaren, a research economist with the W.P. Carey School of Business at Arizona State University, says the 6 percent increase is appropriate in this market.

A 6 percent cost-of-living adjustment, especially if it hasn't covered it all in the past, probably is not overstated and may be quite under what a person needs to make up for changes in housing, McLaren said.

The raises proposed by City Manager Jan Dolan have the backing of the majority of the council. Dolan did not return calls to discuss the raises or future spending projections, but did issue a statement through a city spokesman saying the cost-of-living raises were analyzed very carefully in the context of this process of projecting revenues and were done because cost-of-living raises have not kept pace with the index.

The compensation proposal attempts to address this issue in the city's ongoing efforts to be an employer of choice and retain and recruit the best employees to deliver high quality services to the community, Dolan said.

The city's turnover rate has climbed steadily in recent years, reaching 11.1 percent in 2005-06 as reports of low morale surfaced that pointed the finger at Dolan. Dolan has denied the raise proposal is tied to those reports.

Scottsdale Mayor Mary Manross, who along with Councilwoman Betty Drake and Councilman Wayne Ecton have supported the raises from the start, does not seem concerned with the citys spending projections, citing faith in city officials and the ability to adjust if necessary.

When the economy has slowed down, weve never had difficulty in doing what we have to do, Manross said.

The 2007-08 budget will go into effect July 1.

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