At a work session on Wednesday, June 10, Camp Verde Finance Director Mike Showers outlined the budget situation to the Camp Verde Town Council and argued in favor of holding a vote this year to take measures to increase the budget caps via permanent base adjustment, or PBA.
Since 1980, the Arizona State Constitution has imposed expenditure limitations on municipalities throughout the state.
Cities and towns that exceed their limit in their annual budgets can lose a portion of their shared state income tax revenues normally paid to them from the state.
The annual limits are based on a calculation from the municipality’s budget in the 1979-1980 fiscal year, or at date of incorporation, which then undergoes a calculation based on population growth and inflation to arrive at this year’s budget.
Camp Verde’s base budget number, dating back to the town’s incorporation in the 1986-1987 fiscal year, was $2,072,112. Camp Verde’s population has nearly doubled in that time and inflation has more than tripled, so Camp Verde’s budget limit for this coming year is $12,847,345, though not all elements of the town’s budget are subject to these limitations.
Most years, Camp Verde does not have difficulty staying within these limitations. However, with the town government expressing continued interest in possibly purchasing the local water utility, which would mean adding potentially millions in annual revenues and expenses to the town’s budget, the limit is a concern this year.
There are three ways a municipality can adjust expenditure limitations, according to the office of the Arizona Auditor General. A town can do a one-time override, which would only apply to that year, and is usually done in response to extenuating and immediate circumstances. Towns can also create ballot initiatives to create a Home Rule system — which Sedona does quadrennially, most recently in 2018 — allowing the local government to set its own limits for a period of four years, which must then be approved by voters again after the end of the four-year period. Lastly, towns can seek a permanent adjustment in the base limit.
Showers advocated increasing the base limit by $565,000, which would allow next year’s budget limit to go from $13,116,221 to $16,692,603 once the calculations are added.
“We are one of the last remaining cities and towns in the state that has not enacted either a home rule or a permanent base adjustment,” Showers said to the council at Wednesday’s work session. “We’re not doing anything new out of the water. We’re actually late to the table, but that’s good news. We just haven’t had to be there. Now we’re taking on utilities and it’s causing an issue.”
At the Town Council meeting on Wednesday, June 17, the council intends to take up the issue and potentially set the permanent base adjustment up for a vote in this year’s general election on Nov. 3.
After the initial vote by the council, the proposal would go to the state for approval. In advance of the election, arguments for and against the change will be received for a publicity pamphlet that will be available to voters.
