A Court Date Has Been Set

Depending on the outcome of the court date, you may be subject to additional taxes.  As legal fees are again mounting, we are hopeful you will donate. Without your support, we cannot defend voters’ rights.  Without your support, we cannot prevent unilateral debt and increased taxes.  We need your help.  Please donate.  The initial hearing is scheduled for September 22nd at 1:30 p.m. in Payson.

How does the outcome of our hearing impact your wallet? Proposition 402 provided citizen oversight by requiring complete information on source funding for Payson debt obligations. Traditionally, a “General Obligation” bond would be subject to the will of the voters. Hybrid finance agreements or “creative debt,” which include “Combination” or “Double Barrel” bonds, are being used by governments to circumvent the voters’ input as they require no direct Citizen vote. Proposition 402 prevented the use of such financial instruments at the local level without a direct vote of the citizens. Proposition 402 provided greater transparency in the finance details of local government debt. We have discussed the financial instruments many times. A snapshot is here.

We apologize in advance for the long read.  We hope this post will clarify our prior efforts, the implications, and the financial costs.  The thumbnail version is that a significant financial impact is headed to the citizens of Payson, which may not require voter approval if we are not successful.  That impact appears to be above $500.00 annually in increased property taxes on average.  Any bond will impact non-property owners, such as renters, as the cost will be passed through.  Consumers will have pass-through costs via business as well.  The rate is 10% on residential properties. The rate is higher for vacant land at 15% and for commercial values at 16%.

As you will recall, the Town had proposed a thirty-one percent (31%) budget increase.  That budget was passed in July.  The current budget is $59 million.  Next year’s budget is over $77 million.  A budget needs to be adjusted for inflation.  At the end of July 2023, the inflation rate was 3.2% for the preceding 12 months.  We discussed the proposed budget increase here.  To our knowledge, there has been little revealed about the $18M funding gap between years and how it will be resolved.

The Town of Payson currently has a Capital Improvement Project Citizen Advisory Committee (CIPCAC).  The group has identified many projects: a new fire station, an access road, an aquatic center, and more.  A full copy of the CIPCAC brochure, with all proposed projects, is below in .pdf.  There is community support for an aquatic/recreation center.  We have long stated that we favor such a project if the citizens agree to the debt.

If the citizens approve the funding through an election, or if the citizens approve the lease of public land to complete the project, we would support that effort 100%.

I want a Rec Center!

So do we! We want to ensure that any final decision is fair and equitable for everyone, especially the Town’s residents. We also want a transparent process. One that accounts for all groups, not a private developer’s wishes. The two are not exclusive goals.

If money were no object, we would say start each project tomorrow.  Money is an object, and government money is at the taxpayer’s cost.

The Town has recently released a request for proposal (RFP) and a request for a statement of qualifications (SOQ) for design services of an aquatic/recreation center.  The Town anticipates the design fees for the project to be valued at $3.5M.  The document is attached in .pdf below.

The Town reflects that the current anticipated cost is $30M, including design fees, with a $1.5M annual operating budget.  That cost is exclusive of land if required.  History teaches us that the Town loves a good study.  The Town has multiple studies on Main Street and other ideas.  No doubt a study is again required.  There is no mention of funding.  We hope the study addresses the issue of the citizens’ ability to pay for the project.

Some view the involvement of voters as “the core problem” to make such a project work.  We suspect that if a project is wanted/needed and the costs are reasonable, most voters would support the project.  We anticipate the current construction values suggested by the Town are on the low side, with a projected cost of $30M. The annual estimated operating costs of 1.5M are close enough.  The question becomes, how would such a project impact Payson residents financially?  The impact is significant, just addressing the anticipated debt, not including facility user fees, facility membership, or other direct costs to be paid by the user.

The Town’s calculations on a $10M bond reflect a rate of $29.76 per year on $100,000.00 of assessed value on a residential property. Assuming a bond issuance of $40M and an assessed value of $400,000.00, the actual impact on taxes would be $476.16 for a $40M bond over twenty years. ($29.76*4 = $119.04) and ($119.04*4 = $476.16). We suspect many in the community may have an issue being taxed $476.16 per year via property tax for the improvement. But wait, it gets better, much, much better.

Assuming a 30% income tax burden, the gross income required to pay the additional property tax of $476.16 is $680.23.  The median household income in Payson is $58,109.00, and a $40M bond, with a property tax burden of $476.16 net and $680.23 gross, per household, is 1.17% of the median household income.  Many community retirees have a high property value but relatively low annual income.

Debt service on a $40M note assuming an AA rating for 20 years at a rate of 4% is an annual obligation of $2,908,705.56.  The contemplated debt burden of $2.9M, and maintenance cost of $1.5M  or $4.4M total costs per year is not reflected in the budget increase discussed above.  The $4.4M annual costs would be 5.7% of the $77M budget.

To address the anticipated costs/debt, the Council adopted Resolution 3319 in February 2023.  That resolution allowed:

Section 2: That scope of the Capital Improvement Project Citizen Advisory Committee is hereby established to include:

* * *

B. Recommend a funding strategy, which may include General Obligations Bonds and a bond election to be held in 2025; an excise tax backed bond issuance, accompanied with an increase in the Town’s TPT rate; or a combination of these alternatives to achieve implementation of recommended projects; and

A full copy of the resolution is in .pdf below.

With the purported repeal of Proposition 402, only the General Obligation Bond would be subject to a vote.  We suspect any tax increase via TPT/sales tax or bond issuance may be challenging to support on a $40M project.  The current TPT/sales tax rate in Payson is 9.48%.  An increase to or above a TPT/sales tax rate of 10% for funding projects would dramatically impact local businesses.   Payson does not operate in a vacuum, and Payson, while an isolated market, is not an island.  There are alternatives.  We suspect that a 10% TPT/sales tax rate is an emotional barrier that will change consumption patterns.   Such a rate, with subsequent impact on the local businesses and consumer behavior combined with the plans of the Tonto Apache Tribe just south of Payson to build restaurants, gas stations, and a grocery store may result in reduced TPT/sales tax revenue below the 21/22 fiscal year of $15m.   The financial impact and the contemplated debt are not a “core problem;” it is voters recognizing there is no free money.

Updated documents have been filed with the Court outlining Proposition 105, the Voter Protection Act, concerns.  They are again attached in .pdf below.

A quick tidbit about one of the Town’s presentations.  They quote Thomas Jefferson as follows:  “If you want something you have never had, you must be willing to do something you have never done.”  The trouble is, it is spurious at best; Thomas Jefferson never said it.  It was first used in 2004 and then attributed to Jefferson in 2012.  From www.Monticello.org “This quotation has not been found in any of the writings of Thomas Jefferson.”  Reference here.   It would be refreshing if the Town’s presentations stuck to verifiable information.

The hearing is scheduled for September 22nd at 1:00 p.m. in Payson.

The address is 714 Beeline Highway S, Payson, AZ 85541.  The Court has a YouTube channel if you cannot attend in person.

CIPCAC Presentation via the Town of Payson.

Town of Payson Aquatic and Recreation Center Proposal.

Request for Statement of Qualifications (SOQ).

Town of Payson, Resolution 3319, February, 2023.

First Amended Verified Complaint.