Like the rest of the country, Scottsdale is facing two unprecedented attacks on its future.
First is COVID-19 which health services, state governments and the U.S. government are fighting on a national basis.
Literally trillions of dollars are being spent to fight the disease. In many areas infection rates and deaths are starting to fall. There is even discussion of attempts to return to normalcy.
The second crisis is economic. The national economy has more or less shut down and Scottsdale is no exception. In fact, Scottsdale with its total emphasis on tourism will be affected greater that the average city.
First, a bit of background. According to the website Ballotpedia, Scottsdale has an annual city operating budget exceeding 1.3 billion dollars, a budget that is larger than St Louis; Tucson and Cincinnati.
In fact, Scottsdale’s annual budget is larger than New Orleans ($505M) and Miami ($523M) combined!
My question is, how will Scottsdale leadership respond to this challenge?
On Tuesday night the City Council meeting was primarily devoted to the city’s finances. Unfortunately, little if anything was really accomplished at that meeting with the consensus being that more information is needed.
What information? Any fool can see that our town is shut down. Resort hotels are blocked at the entrance, one of the largest and most successful malls in the nation is empty, Old Town is a ghost town, etc. etc.
When asked about cost saving measures the city manager spoke of how the library is now offering curbside pickup.
I believe that the city manager and City Council do get it. However, getting it and doing something quickly are two very different things!
The city does not have time to wait on twice monthly public meetings. In fact, the City Council should immediately start weekly or even twice weekly public meetings to address and act upon what is a guaranteed financial crisis.
The city cannot sit back and hope that the federal government will bail us all out.
The federal government authorized $150 billion in coronavirus aid for states and large cities as part of the broader $2 trillion package that Trump signed into law in March. But that assistance comes with restrictions. Even when combined with additional help offered by the U.S. government, many leaders outside the nation’s capital also see it as insufficient to keep their cities afloat financially.
Federal legislators apportioned the money only to assist local governments with their efforts to respond to the pandemic, not close the revenue gaps caused by the severe, sudden economic downturn. A senior treasury official recently confirmed the dollars “cannot be used to cover general budget shortfalls.”
Just as with our response to the health emergency, the city must prepare for the worst and take necessary steps to slash the budget accordingly and do so quickly.
They might want to take a page out of the book from the City of Santa Monica, California.
Like Scottsdale, Santa Monica ($750M annual budget) is highly dependent on tourism --- a third of its general fund comes from tourism-related dollars that include hotel occupancy taxes and sales taxes from retail stores and restaurants.
Santa Monica’s response has been to cut over 350 positions from the city payroll; recommend pay cuts for city leaders; elimination of their architectural review board; postponed 18 capital improvement projects; made cuts in the city attorney’s office.
After these cuts were made, their city manager turned in his resignation fearing he was not the right person to lead the city out of their financial crisis.
All the while, Scottsdale leadership waits for more information.
Scottsdale has some wonderful and talented people on staff, but are they equipped to deal with the quick analysis and restructuring of a $1.3 billion dollar budget?
I would suggest that the city immediately form a budget task force made up of key staff as well as reaching out to some of the top financial managers and CEO’s who reside in Scottsdale. By example, both Taylor Morrison Homes and Meritage Homes are headquartered in Scottsdale with annual revenues exceeding $8 billion. Asked to make a drastic cut in overhead they both would be able to do so in days.
I would also suggest that the City Council start with weekly meeting, requiring that at each meeting a different department head would make a presentation with recommendations on how their department would cut expenses by 10-25%. At that meeting, the council would immediately accept those recommendations and cut accordingly.
This option may sound harsh, however, this action would be no different than what millions of families in this country are already doing to their family budgets.
Like all of us, Scottsdale has gotten fat off of a 10 year streak of growth and as the saying goes “it’s easy being green when things are good,” but now our elected leaders must address the situation realistically and immediately or they face replacement --- by election or recall.
Editor’s Note: Larry Kush is senior vice president of Scottsdale-based Orion Investment Real Estate; currently serves on the Scottsdale Planning Commission and is a member of the SCOTT Project executive committee.