Marana’s budget is in good shape, according to new finance director Yiannis Kalaitzidis, who presented the town’s financial results for the most recent fiscal year and gave a new first quarter update to the mayor and council at their Dec. 18 meeting.
A group of independent auditors found no red flags in the town’s expenditures or revenues, which was great news for the finance department. Kalaitzidis, who began his leadership role in late October, went over highlights of the annual Comprehensive Financial Report.
He said this report is one of the most important because it’s a complete analysis of the town’s finances since its inception, and it communicates the financial health of the town’s government.
Marana’s planning area currently occupies over 120 square miles with a population of more than 44,000, according to the report. Since the town uses “home rule” to set expenditure limits, voters approved a limit of just over $200 million in 2016. Kalaitzidis reported only $76.9 million was spent.
The general fund ended the fiscal year (July, 2017 through June, 2018) with $46.6 million, and was a $4.5 million increase from the previous year—which Kalaitzidis attributes to higher-than-anticipated revenues. Revenues primarily consisted of sales taxes, intergovernmental revenue and licenses, fees and permits.
Transaction privilege tax revenues (commonly known as sales tax, but are actually charges on vendors for the “privilege” of doing business in Arizona) comprised about 58 percent of the town’s general fund revenues. Of those TPT revenues, retail comprised a little more than half of the money and restaurants, bars, construction and utilities comprised about 30 percent of the total.
“Sales tax is one of the town’s most important revenue sources,” Kalaitzidis wrote. “This tax makes up more than half of the town’s general revenues. We are continuing to see a modest improvement in sales tax collections this year compared to the last few years.”
The mayor and council approved a temporary half-cent sales tax increase, which began in July 2015, for the construction of a new police facility. Last October, council repealed the increase, starting Tuesday, Jan. 1. Now that the building is operational, next year’s overall sales tax revenues and capital budget are expected to decrease by that corresponding amount.
Marana’s governmental activities expenditures totaled $75 million, which is 16.2 percent less than the previous year, and finished the year costing about $34.4 million after revenue, primarily through sales taxes. This includes general government operations, public safety, maintaining highways and streets, health and welfare, economic and community development, recreation and interest on long-term debt. The town’s largest expense is highways and streets, which comprised 37 percent of government operations, followed by “general government” at about 25 percent and public safety at about 21 percent, according to the report.
At the end of June, the town had $107.9 million outstanding in long-term debt obligations with $6 million due in the next year. The town’s total debt decreased by $3.1 million during the current fiscal year thanks to regularly-scheduled reductions in the principal. This debt comes from a variety of bonds the government uses in various projects.
“In the opening quarter of any year, we want to see good news,” Kalaitzidis said at the council meeting. “For us, good news is to see better-than-anticipated revenues … to see that we are controlling our expenditures very well, we are not overspending and we can identify benefits and efficiencies.”
Kalaitzidis reported that Marana is starting to experience a significant amount of savings from the efficiencies of the new water treatment plant as well.
“We are seeing 11 percent for our contracted services, specifically related to a reduced cost relating to taking away our sludge, hauling away our sludge, as well as electricity utility costs have gone down because of the new efficiencies,” he said.
The town’s largest overall business activity is the Water Utility, with $6 million in expenditures and $12.4 million in program revenues during the last fiscal year. The second largest is the Wastewater Utility, followed by the Marana Regional Airport. These activities accrue revenue mainly through capital grants and contributions and charges for services.
The Highway User Revenue Fund expenditures were 21 percent lower than the previous year due to “delayed projects for the pavement preservation program,” according to the report. The fund’s balance increased by $495,339 and ended the fiscal year at $1.9 million. In the first quarter of this fiscal year, the fund has used six percent of its near $3.8 million budget.
The Transportation Fund had a 31 percent revenue increase this past fiscal year from increased tax revenues. However, there was also a large increase of 383 percent in expenditures due to a variety of transportation improvement projects. In the first quarter of this fiscal year, the fund has used only one percent of its $22 million budget.
Kalaitzidis said the town is in great condition across the board. Counting expenditures from July until September, the general fund has been depleted just 19 percent. It is experiencing better revenues, specifically in the licensing fees and permits area, because of a higher-than-expected Single Family Residential permits being issued in the town. Kalaitzidis reported they expected 740 permits but received 204 in the first quarter, which sets up for 800 in the total fiscal year if they continue at this pace.
“Even for the funds that are below the 25 percent limit, that is because of seasonality,” he said. “That is because they are behaving as we expect them to behave during the first quarter of the year, for the type of fund that they are, for the activity they process.”
Many of the town’s financial documents and reports can be viewed at maranaaz.gov/financial-documents.