The road to finalizing Paradise Valley’s next budget began with an April 28 study session with the Town Council.
Chief Financial Officer Lindsey Duncan presented the council with general fund revenue data and forecasts that will help inform the fiscal year 2022-23 budget, which is set to begin on July 1. Duncan laid out the funding sources and year to date revenues for FY2022 as it stands now, which will help develop the next budget.
The general fund comprises about 79% of the Town of Paradise Valley’s total revenue, according to Duncan. Approximately 70% of that comes from sales taxes, which is further broken down into categories with varied rates: restaurants, retail, hotels, entertainment, utilities and more.
While some categories have seen fluctuations over the last several years due to the ongoing COVID-19 pandemic and factors like seasonal visitors, Duncan said there were some pleasant surprises in the data.
“Surprisingly, we did see sustained spending in the retail category throughout the pandemic, which was very valuable and very useful for us,” she told the council.
Retail ended up with $4.2 million in revenue year-to-date, up from $3.6 million last year — a 17% increase.
Accommodations also experienced a “significant” increase, Duncan said, which she attributed to the resorts’ ability to “be more resistant to price inflation.”
The category has raked in $4 million to date this year. Bars and restaurants are also rebounding with a 221% revenue increase and construction sales taxes are booming as new developments and remodels take over the town.
Real estate and amusement were both relatively flat, but Duncan was “puzzled” by decreases in the utilities category, which includes gas, cable and more.
That’s likely why Duncan said she is anticipating a conservative preliminary forecast of a $1 million increase, or 3%, in year over year sales tax.
“It’s difficult to say how long these trends will continue,” she explained.
Aside from sales taxes, the general fund is made up of intergovernmental revenue (10%), licenses and permits (7%), fines and forfeitures (6%), franchise fees (2%) and other (4%).
Intergovernmental revenue includes income tax, highway users revenue funds and some smaller grants. This category has seen some decreases as Paradise Valley’s population falls, leading to less money from the county and state.
“We have seen some decrease in [population] which has had an impact on this source for us,” said Duncan. “Paradise Valley’s share is still 0.2%, so though it decreased, you’ll still see 0.2%.”
Additionally, a decrease in drivers on the road due to closed offices and an increase in alternative fuels has led to a smaller revenue from the highway users fund. Regardless, Duncan forecasts $2.44 million for 2023 in income tax, a $0.66 million increase year over year.
Licenses and permits, as well as fines and forfeitures are rebounding, the CFO said, and recovering costs lost during the height of the pandemic. The same goes for the “other” category, which includes development agreements, investment earnings, post office sales, and rents and leases. Franchise fees are fluctuating, particularly with cable usage. She forecasts an increase of $0.10 million for the “other” category.
Duncan later confirmed that the upcoming Ritz-Carlton development was not factored into the forecast out of caution for potential delays.
“I don’t want to include it in the forecast only to not have it materialize when we anticipated,” she said, adding that it will be added to the town’s five-year plan instead.
Another study session was planned for May 5, with the first tentative budget adoption scheduled for the May 26 Town Council meeting. Next, a special meeting will be held on June 9 for a public hearing and final budget adoption.