Budget rise far outpaces city growth over 10 years

Arizona Daily Star
May 9, 2010
Rob O'Dell

Tucson's city budget has grown at more than double the inflation rate and nearly five times faster than the population over the last 10 years.

City budget growth remains significantly higher than the inflation and population factors would seem to justify even though there have been numerous cuts over the past two years, scaling back both services and employees, and eliminating one entire department.

Despite a 5 percent reduction in the city workforce from 2000 through 2009, city spending on workers' salaries and benefits has gone up 40 percent, while inflation has been about 23.4 percent.

Another complicating factor has been the amount of construction paid for with non-voter-approved bonds. Bonds approved by voters have their own dedicated repayment source, such as secondary property taxes or other special revenues. Non-approved bonds must be repaid from the operating fund, competing with police, fire, parks and other services for a limited amount of cash.

Operating fund debt payments increased 89 percent, or $43 million, over 10 years, although some of that was increased spending by Tucson Water, which has always paid for construction that way, using its own revenues.

An analysis by the Arizona Daily Star compared the adopted budgets from fiscal year 2000-01 with the current fiscal year, 2009-10. The operating budget - which excludes money for construction - jumped 61 percent over 10 years.

The departments with the biggest increases include Tucson Water at 36 percent, transportation at 43 percent, police at 61 percent and fire at 96 percent.

A change that saved the budget from growing even larger since 2000 is the transfer of the library system to Pima County, for a savings of $19 million.

City officials put most of the blame for the increase on employee costs, primarily health benefits and pensions rather than pay raises, even though they were unable to provide full information on how much salaries have gone up.

In response to a Star inquiry, the city put out a report saying over the 10 years police got increases of 26 percent, fire 25 percent and most other employees 15 percent. But that only includes annual cost-of-living adjustments, not merit increases of 2.5 percent to 5 percent employees received most years.

City officials were unable to calculate how much the merit increases totaled over the decade.

Health benefits jumped 73 percent, other benefits such as premium pay and long-term disability jumped 28 percent, and pensions jumped a staggering 335 percent. Human Resources Director Cindy Bezaury said the city takes "a double whammy" on pensions because they were increased and the salaries were, as well, which translates into even higher pensions.

City Manager Mike Letcher said, "Our big challenge going forward is how do we get control of pension and benefit costs. It's the pension and medical costs that are the real concern."

Finance Director Kelly Gottschalk said the jump in debt repayment from the operating fund complicates budgeting because it competes for the money that would go to maintain or expand city services.

Letcher noted, however, that $20 million of the $43 million increase in operating fund debt repayment is from Tucson Water, which is funded through water rates and doesn't impact the rest of the budget. And Mayor Bob Walkup added much of that went to build the new plant in Avra Valley to ensure the city can take its full allotment of Central Arizona Project water.

The remaining $23 million in operating funds used to pay off construction means that money was not available to help erase this year's $32 million shortfall that led to higher fees, employee layoffs and furloughs and cuts to outside agencies.

The last time voters were asked to approve bonds for anything other than water was 10 years ago, and that was just $150 million for everything from streets, parks and landfills to public safety, drainage and libraries. That doesn't go very far in a city the size of Tucson, when you consider the new main fire station, built with non-voter-approved bonds, cost $39 million alone.

Gerald Juliani, a City Hall critic, said the city is paying for debt out of its operating fund because it doesn't want to face voters in a bond election.

"They're afraid of voters," Juliani said, adding that if the city gave an honest assessment of its fiscal house, voters would be more apt to give their approval.

Kevin McCarthy of the Arizona Tax Research Association said the city's increase in operating debt shows the danger of not going to voters for general obligation bonds, which, once approved, have their own funding source from secondary property taxes.

"It's a perfect example of the danger of doing that," he said.

Walkup said the council looked at each of the non-voter-approved deals individually and could "almost assure you all the decisions could be justified."

"I'm sure it is money well spent for supporting the city," Walkup said. "The city has to invest in itself."

10-year City Operating Budget Comparison

Not adjusted for inflation, which increased 23.4 percent between 2000 and 2009

Category 10 years ago This year Difference Increase/Decrease

Tucson population 482,920 543,566 60,646 13%

Total budget $808.5 million $1.31 billion $501.5 million 62%

Operating budget $623 million $1.004 billion $381 million 61%

City employees 5,933 5,628 (305) -5%

City salaries/benefits $284.6 million $399 million $114.4 million 40%

Parks & Recreation $38.8 million $44.7 million $5.9 million 15%

Police $99 million $159.6 million $60.7 million 61%

Fire $41.1 million $80.8 million $39.7 million 96%

Tucson Water $94.5 million $128.6 million $34.2 million 36%

Transportation $70.8 million $101 million $30.3 million 43%