Chandler officials say finances in a good place The Chandler Arizonan

Chandler officials say finances in a good place

November 17th, 2020 Chandler Arizona Staff
Chandler officials say finances in a good place
City News

By Kevin Reagan
Arizonan Staff Writer

City officials say Chandler’s tax revenues are continuing to stay steady despite the hotel and tourist industries taking a hit from the pandemic.

As the local economy started to shutter in the early months of the pandemic, Chandler’s leaders started scaling back expenditures and braced for a major decline to the city’s revenue streams.

But the city’s most recent financial statements show Chandler ended September with more revenue than it reaped in previous years.

In September 2019, the city collected $11.3 million from transactional taxes — about $1.1 million less than what Chandler gathered this year.

Overall, Chandler ended the first quarter of the current fiscal year with more revenue than the same time period in the last four years.   

Matt Dunbar, the city’s budget manager, said consumer spending in Chandler hasn’t changed significantly during the pandemic, but the health crisis has changed where residents are choosing to spend their money.

“We’ve seen significant increases in things like home improvement and retail sales,” he said. “So, it’s a shift in spending.”

That shift has been a detriment to local businesses catering to travelers and recreators.   

Taxes paid by Chandler’s hotels declined by 32 percent in September compared to the previous year. The hotel industry experienced a notable spike in tax revenue during the first quarter of the 2019-20 fiscal year, but that boom flattened to a point recorded a few years ago. 

Revenue generated from movie theaters, bowling alleys and other recreational activities dropped 66 percent this fiscal year. Taxes funneled from restaurant services declined by 11 percent.

By contrast, retail tax sales – one of the city’s most profitable revenue streams – increased by 14 percent during the first quarter of 2020-2021.

The shifts in revenue among the varying tax categories appears to have balanced out positively for the city and officials believe the $20-million revenue reduction Chandler projected to this fiscal year is accurate.   

“The actual major revenue impact for Quarter 1, when compared to anticipated revenues before COVID-19 reductions were made, leaves us $1.8 million better than anticipated pre-COVID,” a city memo states.

According to city data, at least 83 businesses in Chandler have shut down since the pandemic started in March.

Dunbar said some of these closures were attributed to the pandemic’s economic impact and others were due to business owners selling their companies or changing ownership.

“We also continue to see expansion of our current existing businesses in the area,” Dunbar added, referencing announcements like CVS Health’s plans to grow its presence in Chandler.

While many businesses have shuttered, the city logged more than 300 new companies since the pandemic began.

Other economic indicators also were favorable for Chandler’s fiscal status.

Building permits increased in September compared to the last couple years and the total value of building activity exceeded $50 million.

“Our building permit trends continue to be strong,” Dunbar said. “We’re seeing good construction growth here in Chandler.” 

Dunbar said it’s unclear how Chandler’s finances may be hindered by the pandemic in the coming months, yet the city’s choosing to remain optimistic but cautious.

“There’s just too many unknowns right now,” he said. “We do anticipate that things will continue to go well.”

As Chandler was getting ready to pass its budget for the 2020-2021 fiscal year back in April, city officials implemented measures to reduce spending in case the pandemic’s impact was greater than anticipated.

Travel expenses for city employees were suspended, capital projects were delayed and the city held off on filling job vacancies.

City Manager Marsha Reed said the city is slowly begun to post job opening the last couple of months and may continue to do so depending on the city’s economic forecasts.

“We continue to monitor that,” she said. “We’re not going to just do a full blitz on (hiring) until we know what our revenues look like.”

The positive revenue numbers have positioned Chandler to consider whether it should make a substantial payment to the city’s public safety pension debt.

Like most other municipalities in Arizona, Chandler has an unfunded liability for pension benefits paid out to firefighters and police officers that’s the result of unwise financial decisions made over the years by the statewide retirement system.

The city had planned to pay an extra $15 million this fiscal year toward its $190 million pension liability but held off to wait and see how the pandemic played out.

Since the city’s revenues are better than expected, Dunbar said moving forward with the $15 million payment now would ultimately yield more economic benefits to the city over the next several years.

Some city leaders expressed hesitation about making such a large investment during a time when the local economy is still recovering from a major health crisis.

“I still have reservations,” said Vice Mayor Rene Lopez. “I’m not one for wanting to gamble with taxpayer money. But this is a debt we gotta pay.”

City Council indicated that it is interested in possibly moving forward with paying the additional $15 million to the pension debt but has not yet voted.

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