Discussion and Direction: Possible Ballot Measure Committees for the November 2020 General Election

The Council has identified a number of considerations for possible ballot questions at the November 2020 General Election.

• Affordable Housing
• Open Space and Parks and Recreation
• Charter Amendments
• Public Safety Personnel Retirement System Unfunded Liability
• Ongoing Funding for Flagstaff Watershed Protection Project (FWPP)
• Implementation of the Climate Action and Adaptation Plan (CAAP)
• Other identified capital needs
• Base Expenditure Limitation

Should the Council wish to consider one or more of these items for the ballot it may be helpful to create citizen committees to evaluate the various options and provide recommendations back to Council. Tonight's direction to form a citizen commission to consider one or more of these questions in an effort to evaluate options and provide a recommendation does not in any way obligate Council on their future vote on whether to place an item on the November 2020 general election ballot.

If there are any potential ballot questions the Council is interested in, staff is seeking direction on the number of committees, the specific purpose and assignment of each committee, how long the committee should be active, and the desired makeup of the committee. 

Council has already given direction to create an Affordable Housing Commission regardless of a ballot measure; further clarification and direction is needed if the Council would like this commission provide recommendations on a possible housing ballot question.

Staff recommends holding off on Charter Amendments and Base Expenditure Limitation for the 2020 election and instead doing an off-year Special Election. Both issues are quite technical and the public would benefit from a more focused educational outreach rather than trying to combine the questions with other matters. However, it would be beneficial to form a Charter Amendment Committee now to begin the process of reviewing the Charter and identifying possible amendments well in advance of a possible 2021, or other odd year election.

The options to consider include:

• One single committee to evaluate all possible ballot questions
• One committee for each issue
• Or combining some issues together for a smaller number of committees

Should a committee formation be directed:

• The specific purpose and assignment of each committee
• How long the committee should be active
• The desired makeup of the committee

Staff is requesting this direction now so that recruitment can occur over the summer break and Council can make appointments in the fall.

Council requested information about the City's bonding capacity and the City's sales tax rates. Below is information about bonding capacity and attached you will find information regarding sales taxes, their sunset dates, and revenue generation. Also included below is information on the City's Expenditure Base Limitation.

General Obligation Bonds

To be issued - $21,162,713  (All currently have voter approval)

• Lake Mary Regional Park and other park land acquisitions - $2,800,000
• Public Safety/City Operations Communication System - $362,713
• Forest Health and Water Supply Protection Project - $6,000,000
• Municipal Court House - $12,000,000

Legal Limits Assessed Valuations - 20% Limitation (Statutory limitation - specified uses noted below)

• Water, sewer, artificial lighting, parks, open space, recreational facilities, public safety, law enforcement, fire and emergency services and street and transportation facilities
• Allowable - $201 million
• Current Outstanding/Authorized - $63 million
• Current Available - $138 million

Legal Limits Assessed Valuations - 6% Limitation (Statutory limitation - general use noted below)

• Everything else (i.e. Housing)
• Allowable - $60 million
• Current Outstanding - $0 million
• Current Available - $60 million

Secondary Property Tax Rate

• Currently 0.8366 per $100 of Assessed Valuation
• Only allowed to make debt service payments on general obligation bonds (principle and interest)
• Recent changes:
  • Assessed Valuation for Secondary Property Tax is now the same as the Primary Property Tax
  • Assessed Valuation maximum 5% increase annually
  • Limited to maintain 10% fund balance

Capacity Based on Current Policy

• Currently 0.8366 per $100 of Assessed Valuation
• For planning purposes:
  • General obligation debt is usually issued for 20 years
  • Plan to issue 100% of approved bonds
  • Conservative projection of Assessed Valuations
• Estimated Capacity $62M within current rate (Note: as shown above, the City has statutory capacity in excess of this amount. Authorizing future general obligation bonds for more than $62 million dollars will most likely increase the rate).
  • Remaining capacity through FY 2042
  • Majority of debt paid off by FY 2022

Expenditure Base Limitation

The expenditure limitation sets the total operational spending a city/town may budget and spend in any single fiscal year, as adjusted by certain deductions.  Exceeding the expenditure limitation can trigger sizable penalty payments to the State of Arizona.  Expenditure limitations for cities and other governmental agencies were established by legislation in 1980.  The City of Flagstaff has received 2 permanent base adjustments.  One when the BBB tax was approved by the voters in 1988 and the 2^nd in 2006, with the detail shown in bullet format below.   The alternative to Expenditure Limitation is Alternative Expenditure Control or Home Rule that requires municipalities to receive voter approval every 4 years.  The difference between the two is that a vote to change our base expenditure limitation permanently adjusts the base upward.  The Home Rule options sets no boundary on a municipalities budget but it is only approved for a 4 year period of time.

The last Expenditure Limitation was in May 2006. Voters approved a permanent base adjustment of $25 million dollars due to:

• A 49.8% increase in primary property tax collections ($1.3  million)
• A 26.4% increase in City sales tax ($2.9  million)
• A 34.1% increase in auto lieu tax ($650 thousand)
• An $8 million increase in transportation tax, and
• A 37.4% increase in pay-as-you go capital ($13.2 million)

Since 2006 the City has adopted the following new revenues and taxes:

• Road Repair & Street Safety taxes - $7 million
• Parking District - $1.5 million
• Stormwater - $3.6 million (since FY2006)
• Water Service Rate increases $14.1 million (since FY2006)
• Flagstaff Housing Authority -  $1.9 million
• Butler/Route 66 Bridge $4.8 million

In FY2018 the City was $19 million dollars below the limitation.  However, with the increased pay-as-you-go capital improvement program, the City budget has been consistently close to the expenditure limitation over the past several years. It is recommended that City request authorization by the voters for an additional $25 million dollars. As with the Charter amendments, the educational outreach on a permanent base adjustment is significant and staff recommends that this item be put before the voters at a special election or a general election that does not have other City questions. A citizen commission would not be needed for this question as it is a technical in nature and the information and process is prescribed in statute.