Scottsdale is wrestling with a $12 million to $17 million budget shortfall for the next fiscal year.
Mesa may end one city program altogether. Gilbert is studying a list of places to cut.
Tempe cut 133 jobs and is looking to eliminate 20 more by July.
Amid this economic angst, Chandler may be the only East Valley municipality that has yet to consider a hiring freeze or a reduction in city programs. And city officials are taking comfort in relatively healthy revenue flows.
"In spite of the economic downturn in the economy, we’ve continued to do well," said Garrett Newland, Chandler’s economic development director. "We’re holding our own."
What’s the secret?
City staff members tout sound fiscal policy and business diversity. Others say it’s Chandler’s stage of growth — not at build-out, like Tempe’s, or just beginning, like Gilbert’s. And everyone agrees that Chandler Fashion Center is a boon to the city.
"They’ve got a mall this year that everybody in the south East Valley goes to shop," said Gilbert Town Manager George Pettit. "And it’s new, and everybody likes to go to the new retail."
Chandler is the only East Valley municipality reporting an increase in sales tax revenue during the last six months of 2002 compared with the previous year. During that period last year, Chandler collected $33.6 million, compared with $32 million the previous year.
Gilbert can’t attract such large-scale retailers yet, but the growing population and plans for a freeway may do so soon, Pettit said.
"Retail chases rooftops," he added. "So far, our rooftops are closer to (neighboring cities’) boundaries than they are within our market."
The town is having a hard time even with retailers that agreed to move there. Several grocery and retail chains that planned to open stores in Gilbert didn’t
because of economic hardships across the country, Pettit said. That meant Gilbert had to revise its sales tax revenue numbers down by about $1 million for fiscal 2002-03, he said.
Timing was also on Chandler’s side, Newland said. Chandler Fashion Center opened in fall 2001.
"Our Chandler Fashion Center came online just as the U.S. went into recession," Newland said. "So we had a brand-new sales tax resource to help us weather these hard times."
Impact fees — assessed on new developments for public infrastructure costs — also are key, said Pat Walker, Chandler’s management services director, who also heads budget planning. Of its $299 million capital budget this fiscal year, much of it was paid through impact fees, she said.
Chandler was one of the first municipalities to implement impact fees, and they are more comprehensive than those of most other cities, Mayor Boyd Dunn said.
"We knew lean years were coming," Dunn said. "Secondly, we did not want the pressures of growth eating away at our budget."
That is a significant difference, said Mesa’s budget director, Jamie Warner. Unlike Chandler, Mesa has no property tax and depends much more on sales tax and utility revenue, which can fluctuate, and has lower impact fees, Warner said.
"You can’t compare all the different cities as if we’re all equal, as if we’re working from the same base," he said.
Mesa is now doing a sevenyear and 25-year budget to determine what programs will be affordable and which are wanted by the community, but don’t have identified funding sources, said Mayor Keno Hawker.
Hawker and Warner added that Chandler’s mall is not just a boon for the city — it’s a drain for Mesa. Tempe has seen similar problems.
"What really hurt Tempe is the opening of the Chandler Fashion (Center) and the Ray Road (retail) corridor near I-10," Manley said. "Those two shopping (areas) have cut into Tempe retail tax dollars."
Sales tax collections in Tempe hit $134 million in 2000 but dropped to an unexpected $121 million this year. Manley said Tempe has been among the first in the East Valley to roll back spending — starting with a hiring freeze in summer 2001. Next year’s projections will not include any increases for growth, he said.
Also, Chandler doesn’t share Tempe’s difficulties in being landlocked, Manley said. Now, Tempe has begun an aggressive program to attract new and keep its retail projects, he added.
Scottsdale finds itself in a similar situation. Though the city still has room for growth, growth has slowed more there than in Chandler. Mayor Mary Manross said the city has been preparing for build-out.
"Communities can be healthy when they’re fully mature and built out," she said. "We see our future will be in redevelopment and reinvestment in our older areas."
The city’s $12 million to $17 million budget deficit next year is also a result of the economy’s impact on Scottsdale’s biggest business — tourism, Scottsdale spokesman Pat Dodds said.
Revenue has remained flat even though some had expected a turnaround this year — making it harder to project revenue, Dodds said. However, Scottsdale has taken steps to diversify its economic base over the last few years, he said.
Chandler officials said they have found the diversity of businesses in the city adds to its stability. Besides retail, the city also sees high-tech and financial services industries setting up shop. Intel recently announced a $2 billion investment to upgrade one of its Chandler plants, Wells Fargo’s plans for a new office there could bring up to 4,000 new jobs, and Americredit, an auto finance company, may house up to 1,000 employees in an office under construction.
Cities cannot control the economy, said Jeff Chapman, an economist and the director of the School of Public Affairs at Arizona State University. The best they can do is attract businesses by offering incentives, he said.
"I’m not a great believer in luck," Chapman said. "You need to be sensitive to opportunity."