Even though economists predicted the end of the recession nearly two years ago, the downturn continues to wreak havoc in private and public sectors.
The Oro Valley Town Council heard presentations from town staffers on Wednesday, Feb. 23, about a current $1.2 million general fund budget shortfall and an impending $3 million hole next year.
Officials predict shortfalls coming in local sales tax collection this year, which are on track to come in at $1.3 million less than expected.
Another area that’s lagging is licensing and permitting fees, which look to bring in $350,000 less than what was budgeted.
The town anticipates bringing in slightly more than budgeted in state grants and a few other funds.
To make up the deficit for the current budget year, town finance officials have suggested departments cut $300,000 in spending. The remaining $900,000 would be taken from the town’s reserve fund to bridge the gap.
With an even larger general fund deficit expected next year, finance officials have suggested a collection of measures in addition to spending cuts to stave off the impending shortfall.
The options include “revenue enhancements,” also known as increased fees and taxes.
A 2-percent increase to the town’s current utility tax is estimated to raise $1.3 million in fiscal 2011. Town officials say the increase would cost the average resident $6 per month on utility bills totaling $300.
An increase to local sales taxes, minus bed and construction taxes, of a quarter- to a full-percent would bring in $780,000 to $3 million annually.
If bed and construction taxes were included, the increased tax would bring in an estimated $900,000 to $3.6 million.
Implementation of a 2-percent local renter’s tax for commercial tenants is estimated to bring in $900,000.
Another option under consideration is a local property tax.
The town council requested that town finance officials calculate what the impact to property owners would be for varying property rates.
A $1 property tax, for example, would cost the owner of a property worth $100,000 roughly $8.33 per month. The same $1 assessment would bring in $6.2 million in revenue.
No decisions were made on any of the proposals, and the town council has additional budget discussions planned before voting on a final spending plan.
Annual impact of OV property tax
Home value $1 tex $1.50 tax $2 tax
$100,000 $99.96 $150 $200
$200,000 $200 $300 $399.96
$300,000 $300 $450 $600
$400,000 $399.96 $600 $800
$500,000 $500 $750 $999.96
Source: Oro Valley