February 28, 2017
Reading and listening to the Public Safety Retirement System (PSPRS) and sales tax debate brings to mind a quote delivered by William Shakespeare, HENRY V circa 1598-1600, "Every subject's duty is the Kings; but every subject's soul is his own." The question during this debate has to do with what is right and what is wrong and how to fix the wrong.
Using the current public safety service model in Prescott, police and fire costs the City approximately 26 million dollars annually. This includes the current assessment for the PSPRS plan. The retirement system has received approximately $45.4 million from the City of Prescott and its' employees in the past 16 years, and yet, Prescott still has an actuarial unfunded liability of $78.5 million as of June 30, 2016. This amount is expected to increase to $81 million with the recent Supreme Court ruling in the Hall/Parker case.
Prescott has the ability, for the time being, to pay the mandated annual PSPRS liability using the general fund. The system as a whole is flawed. As a community we should not direct blame towards our local police and fire personnel. The assured rate of return and fund balance protection appear to have created an unsustainable predicament. Using limited reserves to reduce the PSPRS liability will have an insignificant impact on the increasing liability while limiting the other areas of service for the community. It might appear fiscally advantageous to increase the City of Prescott's annual contribution by decreasing the rate of increased PSPRS liability. I'm not sure the 0.75% tax will do any more than pay for the annually mandated contribution, however, "stopping the bleeding" so we can address a severed artery appears the choice by using a temporary sales tax increase. This will not fix the problem since it is a Band-Aid approach. Prescott cannot fix the PSPRS problem; we can only temporarily stop the bleeding. The State Legislature must fix the PSPRS problem.
As long as the City of Prescott maintains a police and fire department and the state Statues require the City's participation in the program, there will always be a PSPRS liability. The PSPRS liability is part of doing business in a municipality. A manageable annual PSPRS contribution is a worthy target but how to get there is a question for communities statewide. Both police and fire departments require more money to pay for the City's PSPRS liability and to function on a daily basis. One cent from the general fund provides approximately $ 14.9 million annually and police and fire are one of four departments receiving operating funds from the general fund. It is my understanding that the police and fire departments alone require approximately $26 million for their operating budget. A tax increase of 3/4 of a cent would bring in an estimated $11 million dollars in sales tax and would temporarily span the general fund gap. This combined with model changes for management, service delivery and reserve pay-down, the City has a reasonable plan to address the immediate PSPRS liability.
I do not support unjustifiable taxation. The police and fire service currently costs approximately 26 million dollars annually to operate. We cannot pay for these expenses with $14.9 million. It is wrong to expect the police and fire services without providing the funding. A 1.75% sales tax contribution will provide an approximate $26 million to public safety and it does not go away simply because we have been dealt with the PSPRS liability. If 1.75% includes the entire General Fund and tax increase of 0.75% where does the revenue for Parks and Recreation, Library and General Government come from?