Chandler planning for possible tax revenue drop The Chandler Arizonan

Chandler planning for possible tax revenue drop

Chandler planning for possible tax revenue drop
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By Kevin Reagan
Arizonan Staff Writer

After experiencing record high tax revenue this past year, Chandler officials are planning for a possible economic downturn in the near future.

Dawn Lang, the city’s management services director, recently told the City Council that Chandler’s revenues are at the highest they’ve ever been but that projections indicating this upward trajectory could soon reverse.

Sales tax revenue is expected to reach $140 million this fiscal year – almost double than what was generated at the start of the Great Recession a decade earlier.

Retail taxes are up 7 percent from last year and revenue from hotel transactions have increased by more than 18 percent. Yet the city feels the need to take a cautious approach to financial planning as Chandler gets closer to reaching total build-out.

During a budget meeting with council members, Lang projected a slow down in revenue that may hit the city by 2022 and result in a $10-million tax loss. It’s a relatively small loss compared to the city’s entire budget, yet it could still impact how many one-time expenses the city makes.

“We still are seeing some significant development revenue coming into the city that we know is not going to continue year after year after year,” Lang said. “So, we have to take that into account.”

The city’s latest financial report shows General Fund revenue increasing by 8 percent compared to historical trends. Despite this healthy display of consumer confidence, the city’s been tracking some economic indicators suggesting it should still prepare for a gradual downturn. 

Tax collections in December showed a 2-percent drop compared to the same month in 2018. The last time Chandler experienced decreases like this was in October 2017.

“This is mainly due to the contracting and tangible personal property rentals, which tells us new development may be winding down,” a city financial report states.

There are several factors that could impact the global economy and have ramifications for Chandler, Lang added, prompting the city to adopt a conservative mindset as it carves out of the 2020-2021 budget.

Over 81 percent of the revenue Chandler’s projected to receive in the next fiscal year is considered “vulnerable” to economic volatility.

Some economists have predicted another recession will hit the United States in 2020, despite signs of strong consumer spending and low interest rates.

“There is an undercurrent of alarm in this country that a recession is not only possible, but probable in the next year,” economist Bernard Baumohl told a group of Arizona business leaders last September.

Even though the city’s projecting revenue declines in the coming years, it still expects to have a budget surplus available for new expenditures.

The city’s estimating to have a $3.8 million surplus in its upcoming budget that may be spent on new personnel, services and maintenance. City departments have already submitted requests for 23 new positions and $6 million in ongoing expenses.

Lang said the city will need to evaluate which new expenses will be the most sustainable in the prospect that tax revenues do start to decline.

“We’re in a position now where we have to be very careful as we add that additional ongoing (expenses),” she said.

Mayor Kevin Hartke believes the city’s conservative estimates are the right strategy to take if it wants to maintain the stability that businesses look for.

It’s better to be cautious, the mayor said, than have to retract and make some radical decisions to cut spending.

The council will continue holding budget meetings in the next few months until it adopts a tentative budget in late May.

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