Two years ago, the two of us were the face and voice of Proposition 443 which was passed by Prescott citizens to pay down the $80+ Million PSPRS unfunded liability. Working closely with the “Stand for Prescott” grassroots citizens group, we were able to garner the support of Prescottonians who were ready to stop kicking the can down the road and pass a ¾ of a penny sales tax dedicated solely to paying down the unfunded liability. Our City’s General Fund was extremely unstable; fire stations were being browned out, our public library was closed on Sundays, and the financial future of Prescott was bleak. Some who were against the Proposition were calling for the city to file bankruptcy. That was their hope and only solution.
We knew there was a better way for Prescott and worked hard to pass the dedicated Prop 443 tax. The ballot language was very specific that all monies raised from the tax would go directly to pay down the unfunded liability. Furthermore the tax would go away after ten years or when the debt reached $1.5M.
Those who worked hard to defeat Prop 443 are now claiming the Council is “shifting taxes” and “diverting monies” from the tax revenue. Nothing could be further from the truth. In fact the City remits exactly every penny raised directly to PSPRS monthly. Furthermore, the City continues to pay the Annual Required Contribution (ARC) from our General Fund without touching one penny of the tax revenue which is exactly what we said we would to do. In order to pay down the debt sooner, the City also paid an additional $11 Million from Reserves in FY18, and $580,000 from sold assets was also paid toward the unfunded liability.
As we continue to pay this unfunded liability, the ARC will go down. That’s a good thing, because the reduction in the ARC this year has enabled us to budget an additional $1.1 Million toward a new airport terminal. We all know how much we desperately need a new terminal, and the FAA wants the City to have some skin in the game. In total the City is budgeting $3.5M of the total $16.2 Million price tag for the new terminal.
The ARC for FY20 is $7,269,667. We will pay every cent of that amount out of General Fund without touching the tax revenue. In addition, we anticipate the Prop 443 tax will bring in $12.8 Million which will allow the city to pay almost three times the required payment in an effort to pay down this unfunded liability as soon as possible. Currently, we are on schedule to retire the tax in December 2025, two years ahead of schedule.
Without the passing of Proposition 443, the ARC would be approaching $10 Million, further destabilizing our General Fund. We would still be browning out fire stations and reducing the number of police officers. Our library would be closed several days a week, and we doubt seriously that we would be able to add more trails and recreational opportunities. We certainly would not be building a new airport terminal or attracting new investment such as the Hilton Garden Inn or Eviation to our community.
It is truly remarkable that Prescott's unfunded liability has gone from being 30% funded to 46% funded in two short years. We get calls from other cities/towns asking how we managed to make such a turn around. Rather than becoming known as the first city to declare bankruptcy over the PSPRS unfunded liability, Prescott is the shining example of how one municipality stepped forward, found a solution and is staying the course. We continue to encourage the Arizona Legislature to make needed reforms to the state-controlled PSPRS. Transparency, honesty and doing exactly what we promised have brought prosperity to Prescott. We are grateful for your support and trust.