At a work session on April 27, the Cottonwood City Council began its annual process of planning for the city’s budget. Although the 2021-22 Fiscal Year Budget will not be approved by council until June, Cottonwood Budget Finance Director Kirsten Lennon spoke before the council at the April 27 meeting to explain the city’s current fiscal situation, as well as potential goals in the coming year’s spending.
The proposed budget for FY 2021-22 totals $20,026,363, a 7% increase on the $16,906,715 for FY 2020-21.
According to Lennon, the city is coming out of the COVID-19 pandemic in excellent financial shape, due to a combination of preparing for the worst, high sales tax revenues through online sales and a strong return of tourism to the area.
“We lowered our estimates for 2020,” Lennon said. “We cut back our budget. We made sure we were really conservative and paying attention to what we were spending money on. So at the end of 2020, we ended up with actually 11.8% over 2019 in sales tax. So that money all got carried over into 2021. Partially that’s due to the half cent sales tax increase from 2019, and the fact that we allocate a lot of those to reserves, so by saving that money it continues to carry over into the next year.”
Cottonwood’s surprise boon of sales tax revenue in 2021 mirrors that of other municipalities in the area. As a result of the U.S. Supreme Court’s 2018 decision in South Dakota v. Wayfair, local governments collect sales taxes on online purchases in the area under their jurisdiction. With the pandemic causing an increase in people ordering things to their homes, sales tax revenues increased.
Camp Verde even exceeded Cottonwood’s strong showing, with revenues increasing by 37% compared to the previous year.
As a result, the city of Cottonwood is in a position of being able to fund most of the city council’s wish list.
Chief among these is strengthening the city’s reserves, a long-time desire of the council. With revenues so high, the city is allocating a full 25% of sales tax revenues this year, higher than last year’s 16.67%, for a total of $5,771,120, but with over $5 million of the budget currently undesignated, a total of over $11 million could be added to reserves.
The budget also sets aside over $600,000 for replacing capital and equipment, which goes into reserves if not spent.
“I think it’s fantastic that we are in the position we’re in,” Mayor Tim Elinski said. “I think we were all very concerned last March, a year ago, when we thought that the economy would fall apart. Obviously it hasn’t. We’re doing really well. I think it’s wise that we’re still being very conservative in our increases and anticipated increases, because that can only benefit us.
The council expects to be able to fulfill most staffing requests from city departments.
A new ladder truck — a long-time desire of the fire department — is also included in the budget. The city also hopes to expand police and fire dispatch’s regional efforts, and to spend $200,000 on picking up trash in the area.
