Wednesday, April 16, 2014

Does Oro Valley Government "Want It Both Ways?"

The most key assumption underlying a budget is the assumption about the economy.  In this case, is the Oro Valley economy robust or is it still recovering from the recession?

Oro Valley's Town Manager Caton's proposed 2014-15 budget most certainly assumes a robust economy.  Caton presents a budget that projects robust revenue growth.   His plan is to spend it all.   As our colleague John Musolf posted Monday, Caton plans a diminimus increase in the contingency fund.  Caton is not going to put aside funds for a rainy day in 2014-15.  No.  Caton wants the town to spend virtually all of the revenue increase, an increase of 14% over prior year.

This assumption of a robust Oro Valley economy is in stark contrast to that presented to council at the regular session meeting January 15. Oro Valley Economic Develop Manager, Amanda Jabobs observed:
"The economy is beginning to recover. But we have not fully recovered. And we won’t in the next year.”  According to a UA economist, she noted, the recovery remains painfully slow by historical standards."  (January 15, 2014 Item 8 discussion.)
Jacobs reports to Town Manger Caton.  Certainly, he must have reviewed and approved such an important comment.

At that same meeting,  Oro Valley Mayor Hiremath voiced his opinion on the economy, concurring with Jacobs:
"We are no where close as a nation or close as a town to being out of this recession. So though we may have substantial growth over a prior year, it is a relative issue based on pre recsssion times." (January 15, 2014 Item 8 discussion.)
So, we ask, what has changed so dramatically in the past 3 months to cause the town manager to assume a robust economy?  Because, for all we see, which includes a jobless recovery, a continued rock bottom interest rate policy that has failed to stimulate investment, and a now stuttering stock market, the recovery, if there is one, is very tepid and very fragile.  

Is the economy still in recession as the mayor and the town economic development manager asserted three months ago in support of extending a temporary A-Frame permission for 2 years?  Or during this three-month period has the economy radically changed allowing the town to spend a substantial increase in forecasted revenue? Is it possible that the projected revenue increase is a mirage?  Much of it is from economy-sensitive construction fees. These are one-time revenues.

If indeed the economy has recovered, then there was no need to extend the A-frame policy in January.  Mayor Hiremath asserted that it was precisely because there was a slow recovery that this "special favor" be granted to business.

If, on the other hand, the Oro Valley economy is in recession, as Hiremath and Jacobs asserted in January,  then a 14% increase in spending is fiscally irresponsible.

If, indeed, Mayor Hiremath agrees with this extensive spending increase, then he should recommend that the temporary A-Frame policy be rescinded.  He should also recommend giving the community back the doubling of the utility tax he championed in 2010.  After all, in order to agree to a 14% spending increase he would most certainly have to acknowledge that there is no longer a recession; thus, the A-Frame sign relief and the double utility taxes are no longer needed.

Mayor Hiremath has not publicly opined on the budget.  Will he support such massive increased spending or will he advise caution, as his remarks in January would indicate?  We shall see.

In the meantime, it appears to us that we are witnessing a situation in which town government assumes one set of economic assumptions to serve one purpose and then a opposite set to achieve another purpose.  Perhaps they "want it both ways."

1 comment:

Richard Furash, MBA said...

Victorian Cowgirl had an excellent comment related to this on Monday's budget item. "I love how they change their opinion of something depending on whatever they're trying to sell us at the time."

During the January 15, Council Meeting, Mr Caton also commented on the economy. He said it's clear that we will not be out of recession in the new 2-year period.

Perhaps, the Ms. Jacobs, Mayor. Hiremath, and Mr. Caton just forgot what they said just months ago.