Speaker: David Cavazos, Phoenix City Manager

Subject: The Economic and Financial Impact on the Biltmore Area Due to Phoenix Financial Problems

When I got my job a lot of people congratulated me, but one person said you inherited a nightmare. I said actually not true, we have had excellent City Managers and they have done a fine job. This is the largest Council Manager form of government. It is really a dichotomy that we have this type of government; and it is because of people like you who want a professional management government. You don't want someone put into a job because they donated money to a campaign. Phoenix has the best financial ratings that any city can attain. We have AAA, AA1and we can get money at 4% because, we just got a 5th All American City Award and no one has ever gotten 5 of them. We have the greatest employees in the world and people volunteer and give their heart to this community. Last week I went to a Senior Center lunch and they had donated 150,000 hours of time. Although we are going through a budget shortfall at this time we have to remain positive. This is the worst recession since the great depression so of course the City is going to have problems as is everyone else.

The first week I had the job, the budget went down about another hundred million. It was just that we just clarified things a little bit and were a little bit more transparent and that was only for the first year. Then when we added the next year, the short fall was 241 million dollars. In terms of people it is about 2500 people. My first assignment was to deal with that. We couldn't bite that off all at once; so we had to use some financial traction just like you in your business and everybody else. So we restructured some debt, we cut back on some expenses that didn't need to occur right away, we became more efficient, and also we lease purchase some cars, stuff like that. So that brought that 241 million to about 150 million. We are now working on consolidating a lot of departments.

Police and fire are our number one priority. They represent 71 per cent of our budget, so for every dollar you pay in taxes, 71 cents goes to police and fire. That is fantastic as they are our first responders and I support that; but to close the budget gap, the only way to keep police and fire as it is, I would have to cut everything else-no landscaping around the city, no personnel department, no finance department, no public works so you wouldn't get your trash picked up. Don't think people would want to take their trash to the dumps themselves, wouldn't have to worry about paying taxes as we there wouldn't be any auditors, we wouldn't have any street department to fix pot holes in the streets. All that would be left would be police and fire. I said as my first act as City Manager is that we are going to have to do cuts across the board and everybody is going to have to share in the pain. When we had to cut the police and fire by 11 percent, I cut my office by 33 percent. I also cut the Mayor and Council offices each by 30 percent. We did everything we could to reduce court staff, management, but we made sure we kept our front line people on the job. When I went forward with my recommendations, they were large to say the least-Sr. Centers were going away, 6 libraries, meal on wheels, and the summer youth program, the parks programs, 350 police officers, 150 fire fighters and that was across the board. What ever you saw about the 911 calls where they said wait and see, well that was all nonsense. We still have 2700 police officers and if you have a problem they are going to come to your house and if you have a fire the fire department will come to your house. Aside from the politics, it is important that you know that we are going to reprioritize. Having said that, because public safety is so important, all these programs we are cutting are so important, the Council said "no way". These are not cuts, these are amputations is what the AZ Republic said and it is a good statement. So what they did was an emergency food tax. When I was asked who had the food tax, I said everybody has the food tax and Phoenix was the only city that did not have a food tax in Maricopa County that borders Phoenix-Glendale, Paradise Valley, Scottsdale, Avondale, Guadalupe, you name it has a food tax, except for Mesa and Surprise. That was a no brainer, we knew some people would complain, but it just put us on an equal playing field with the other cities. It starts April 1, it is 2 per cent which is one of the lowest food taxes, but that is going to result in 50 million dollars in revenue a year and because we can get it on an emergency basis, we will get 12 and a half million for April, May and June and that will result in our being able to restore the vast majority of police and fire, so that leaves us with 1 per cent we are still working on. City employees make middle class salaries-half of them make $56,000 a year and the other half make more than that. A lot of the stuff you are hearing about in the newspaper relates to cost of training, cost of firefighters and it is comparing apples and oranges. If you compare salaries with all the benefits you will have a lopsided equation. When we did the food tax, we asked the public to do more by paying 2 per cent more, but the employees needed to step up too. If the public is going to do 2 percent we have to do something too. So management and executives did 9 percent concession and I did more than any one.

What matters now is how do we help the city go forward. What I have been able to do is convince the unions through negotiations, never been done before-no city union has ever taken a cut in pay before, so the bottom line is they are going to take a 3.2 percent pay cut. On the budget we have that is 32 million dollars this year and 32 million dollars next year, and that also for the people who work at the airport, convention center, all the people who work for the water department and that will mean you water rates will be cheaper, who work in transit and that will be another 30 million and if you add the management and executives that is another 107 million dollars we are going to save over the last two years. All that money is going to go to services, better rates, more competitive biding. That is the budget and the whole situation. We started at a 250 million dollar deficit, we got 2 million from the food tax, and we got 90 million from financial transactions and another 32 million from employees. We are now down to about 65 million in cuts which isn't too bad in comparison to where we started.

Let's talk about the Biltmore area; it is the jewel of Phoenix. We worked very hard with Hines and Westcor to get that water deal done and that was a great partnership between the private and public sector. It was a win win for everybody. The city made a contribution and the private sector made a contribution. Right now if we had to make that decision, people might say you should wait, but I have to tell you having that water pressure built now for the future means you can get all your high rises in and condominiums, development for your malls so we did it absolutely at the best time. The private sector was right, you said you could do it better, faster and cheaper and you did. You saved us a lot of money. As far as the budget cuts in the area - the Devonshire Community Center was going to be closed, but we can now put it back because of the food tax. We were going to close the Century Library and we have put that back due to the employees' sacrifices. So in terms of services in this area it appears that everything is going to be restored. You are going to be good from an infrastructure standpoint. From a pure economic development standpoint, we are working with all of your retail developers on redevelopment. We did win the City North case but they did say don't do this again. As far as our position on economic development, we want to have a department that stays out of your way, that helps you get through the process quickly. We have many innovative things we are doing involving services, third party planning reviews, expedited processes, existing building codes so you could use the same footprint and not have to knock down a building and use codes that were in place when you built originally and that is really important for the malls. Our goal is to make sure we are totally competitive in terms of pricing and cost and everything else. I just got the sales tax for last month and believe it or not I think we have hit bottom because it was flat. We had been dealing in double digit decreases and three years in a row of declines. We think there will be a 4percent increase for next year, so things are looking better. Once thing about a crisis is you learn from it. As a city we spent every nickel that came in, so when we start getting all this extra money one of my first points of my seven point plan is called Fiscal Responsibility. Put some money away for our contingency. What we have right now for our reserve in Phoenix is (our budget is 3.7 billion dollars) $28 million dollars which is just a 2 week payroll. Phoenix Children's Hospital has about 300 days cash and they don't feel that is enough.

QUESTIONS

When you close centers it still costs money to maintain it and then get it ready for reopening also to train police man it costs $100,000-so is that a consideration when deciding on what to close? We have criteria we use for reductions. Sr. Centers for example; they are very important and for some senior citizens that center is there whole life. So closing it is not so much a financial issue as it is a service issue. Parks issue, you have to maintain the parks. If you don't maintain the parks they become blighted, they become a community deficit rather than an asset. We have to make sure we keep the parks open. What happens though with parks is that parks were historically for people who walked their dogs, through a ball, play baseball and stuff like that. They have transitioned into recreational centers where we have a variety of classes, and then we have after school programs. We grew the programs that may not be a core function. Yes we need to maintain the parks, keep vagrants out, but do we need to take over the role of what a parent has done. That is the debate there. In the case of the libraries, when I went to the library you went to get books, now you get DVDs, you can get stereo stuff, go online to surf things. These are nice to have, but do we really need to have them? In terms of police officers, yes. The bottom line is they are our first line of defense and our highest priority.

What is happening to Dial A Ride? The Council felt that the sales tax goes to help those most in need, people who need to use a Dial A Ride, public transportation to work, the meals on wheels, the senior centers, the youth programs for the disadvantaged, the police and fire departments that are already needed in all these communities. The food sales tax we need to keep things like the Dial A Ride.