Ted Simons: The Phoenix city council voted yesterday to pass a controversial budget that closes a $38 million dollar shortfall. Covering the story for the "Arizona republic" is Dustin Gardiner. He joins us now. Good to see you here.
Dustin Gardiner: Hi, Ted.
Ted Simons: Going through this from the get-go, what exactly now did the council vote on?
Dustin Gardiner: So last night the council voted on a plan to balance its budget Phoenix is facing a $38 million deficit in the upcoming fiscal year, which starts July 1st. This deficit is a result of several things, one of them is overly optimistic revenue projections. Phoenix was way under its projections for the current year, but beyond that expenses are rising much faster than revenues. The city's pension costs, health care costs are all skyrocketing and the city is trying to find a way to keep up with that given the sluggish revenue numbers.
Ted Simons: Now this is the city manager Ed Zuercher, this is his budget or is this budget piggybacked onto someone else’s budget?
Dustin Gardiner: Okay so Ed Zuercher, the new city manager, he was put in the job permanently in February. He inherited this situation from his predecessor, David Cavazos the prior city manager, and so he is trying to clean up the mess after this year's budget, that contains the shortfall. He’s projected into the next year, he is projecting how the city can dig back from the $ 38 million hole.
Ted Simons: Did he-- I thought his original budget had far more in the way of cuts, correct?
Dustin Gardiner: Initially Ed had warned that the city would have to cut city services by about $29 million if it did not increase taxes or force employees to take pay and benefit cut. But those service cuts, which were pretty drastic, included things like pools, senior centers, recreation programs, fire inspectors, those are all off of the table because the city council agreed to a plan that includes tax and fee increases, as well as city employee pension -- sorry -- salary and benefit cuts.
Ted Simons: Right. So, let's go through this now. The employee pay and benefit cuts, are these all city workers, union workers, both? What is going on here?
Dustin Gardiner: This is all city workers, all five unions, even the non-unionized employees, it’s about 14,000 city workers who are affected by this.
Ted Simons: And as far as the unions now, four of the five unions have already gone ahead and agreed to this, how much of a percentage cut here now?
Dustin Gardiner: So it’s 1.6% in the upcoming year and then the following year,second year of the contract, it’s .9%. All of the city's unions have been forced to take contracts with these provisions. Four of the unions agreed to those contracts, kind of, you know, towards the end of the process for most of them. The 5th union, the police employee union, they did not accept the contract but the council took the unprecedented step of imposing this on that union. And now the union is trying to fight that and they're organizing and collecting signatures to trigger some sort of a referendum election or if not a referendum about initiative that would force the council to go back and take back the cuts that they are being forced --
Ted Simons: That imposition on the police union -- I know there is a lot of fussing and fighting leading up to yesterday, what happened yesterday?
Dustin Gardiner: You know, it has been quite a dramatic process, and there were -- there were some debate yesterday, but yesterday was strikingly undramatic for the whole process. You know, throughout this process, we have had hundreds of employees, police officers filling the council chambers, protesting this budget,protesting the cuts. Last night, it sort of ended with a whimper. We had the council come in and the votes were clear on both sides and without a whole lot of fanfare they put it through.
Ted Simons: You mentioned tax increases, what kind of tax increases, it sounds like it’s just one thing?
Dustin Gardiner: Most of the new revenue is coming from a new tax on residents' water bills, this is based on water meter size and for the average resident, it will be about $1.50 a month. That is the bulk, the vast majority of these revenue increases, but beyond that, there are some fee increases on things like city recreation centers, senior centers, and those are bringing in a little bit more money, but most of it is the water bill tax.
Ted Simons: It is the size of the water, what, the water meter?
Dustin Gardiner: The water meter.
Ted Simons: Okay. So that basically says if you've got a bigger water meter, you're essentially using more or how much water – kind of confusing there.
Dustin Gardiner: Yeah, it is not based on water usage, it’s just based on meter size.It doesn't really reflect, you know, any amount of water that is being used. It's a -- for most residential customers it would be the $1.50. For a larger meter like in a commercial setting, it would be more than that, but that's the average for a homeowner.
Ted Simons: And the fee increases, again parking meters will be increased, correct?
Dustin Gardiner: Yeah so parking meters was part of that. That is not going to add a whole lot of revenue. That is a piece of it. The city, currently all of the parking meters, anywhere you are in the city, even if you know you’re outside of the Super Bowl, it’s you know $1.50.But they want to change that to a range of 50 cents to $6 dollars per hour.
Ted Simons: $6 per hour?
Dustin Gardiner: That would be like for a premier event, you know say the Super Bowl, or athletic event downtown I think is what the city is suggesting.
Ted Simons: Goodness gracious. Alright but as far as now city services, senior centers, pools, fire inspection, code inspection, those things not cut at all?
Dustin Gardiner: Yeah, that’s all off the table.
Ted Simons: Okay, but there are fee increases for using senior centers.
Dustin Gardiner: Right.
Ted Simons: And using athletic centers, are they big fee increases?
Dustin Gardiner: You know, I -- I guess it is a matter of perspective. For a resident who uses a senior center currently they're paying $ 10 per year for an annual pass. That a lot of people might think that’s not very much. Now they will be asked to pay $20. I have heard some complaints about that. For the most part, I think a lot of seniors who came to the city budget hearings, they said they are willing to pay a little bit more if you can keep this service open for us.
Ted Simons: Interesting. Alright so the council voted it was 5-4, who opposed and why?
Dustin Gardiner: Okay so the opposition was primarily made up of the council’s fiscal conservatives. You have Sal Diciccio, Jim Waring, Bill Gates, and their stance was that the city has a lot of excess that it could cut rather than raising taxes, they wanted to cut those things like lobbying, PR, travel, things that they felt are unneeded and they would rather cut that and not ask residents to pay more. The fourth vote was councilman Michael Nowakowski, his reasoning was a little different, actually siding more with the employee union saying it is unfair to ask them to take these cuts given that they have faced cuts in the last you know five years or so since the recession.
Ted Simons: And so is this a done deal or will we see tinkering here?
Dustin Gardiner: There’s some formal votes that have to take place before July to finish all of this up, but for the most part, this is essentially a done deal. They could always go back, but at this point, it's clear that the majority of the council has sided with the plan that Ed Zuercher suggested.
Ted Simons: You mentioned kind of going out with a whimper last night, yesterday, not really a heck of a lot of fire and brimstone going on huh?
Dustin Gardiner: Not yesterday. But before that when we had the police coming, it’s been an unprecedented budget process in Phoenix. Especially with the union contracts being imposed. It has been a pretty contentious process, so last night wasn't really representative of the drama that’s had gone on, if you will.
Ted Simons: Before we let you go, and you referred to this earlier, regarding why the city is in this position, the revenue position, they were just too rosy and were off the mark. Is there any urgency to learn why those projections were so off the mark and to avoid that kind of thing in the future?
Dustin Gardiner: That was the common theme at the meeting last night. You had a lot of council members walking away saying we have to learn something from this, this is a wake-up call, and to do that the council has pushed the city manager to launch an organizational review, so the city will spend the next summer and following months reviewing its organization and how it prepares revenue projections and trying to find out what can it do to make sure that this deficit isn't a repeat in future years and how do you prevent these, you know, overly glossy projections from being an issue again.
Ted Simons: I would think you would have to find a new crystal ball if we’re going through the same kind of thing in the next budget process.
Dustin Gardiner: Right.
Ted Simons: All right. Well great work, it’s good to have you here, and we will continue following you, following the city council.
Dustin Gardiner: Thank you
Ted Simons: Good to have you here.