On Fiscal Planning
The Town of Carefree is heavily dependent upon visitors to Town to fund fire and medical first responders, police, roads, the gardens, landscape, drainage, ensuring orderly development, and enforcing ordinances. Most of the Town’s recurring sales tax receipts are funded by non-Carefree residents. One of the most significant forms of sales tax the Town has collected has been on growth, in the form of construction sales tax. This is a one-time tax collected when homes or commercial buildings are built. This form of revenue has traditionally funded capital spending. As the Town nears buildout, this form of revenue is decreasing at the same time the need to repair roads is increasing. Additionally, the Town has recently lost residential rental tax revenue through changes in state law.
What isn’t happening? The costs for public safety are not going down, and we expect large increases for these contracted services at a time when revenues will be decreasing. Most communities balance this with a property tax, but Carefree residents have chosen to stick with a sales tax funded model. This means that the town needs to ensure that it has a sustainable sales tax revenue stream. Please keep in mind that services are not taxed, but hotels/resorts are actually taxed at 6%.
In essence, most of our public services are funded by others. The Town of Carefree only has three viable locations for retail revenue generation, Town Center, NE corner of Carefree Highway and Cave Creek and the NW corner of Carefree Highway and Tom Darlington. Even if we maximize these three locations, we still, more than likely, hit short of build out revenue requirements.
I am sure based upon where you live, you have made wise financial decisions in your life, and some of them were difficult. You took out loans to fund education or businesses, put money away for retirement, and probably didn’t work for free or run a business where you provided free goods and services. I will further bet that you have a diverse portfolio of investments to ensure your personal sustainability, pay bills, maintain your home, and have a good quality of life. You also probably don’t have everything tied up into a single stock or two.
Great care went into the Special Planning Area (SPA) decision for the NW corner of Tom Darlington / Carefree Hwy. 1. It’s already a commercial corner at an arterial intersection. 2. Resorts minimize in and out traffic and have positive value impacts in higher end communities 3. Extensive discussions occurred with adjacent neighbors and are reflected in the SPA language. 4. The Town automatically gets 6% tax on the visit and additional revenue from secondary spending of these visitors to Carefree. 5. The site would still need to be rezoned and would need to conform to the SPA requirements. 6. Any rezoning could be referred to the voters. 7. Carefree was created as a resort community; the Desert Forest Inn (Civana) was one of the first developments. Even at incorporation, Town of Carefree founders stated that resorts are as much in the character of Carefree as the semi-rural lifestyle.
The Town of Carefree does not have the option to be insolvent, and legally can’t run a deficit, or take on debt for operations. Residents have three choices.
- Pay the proportionate share of the public service bill (Property Taxes)
- Use capitalism to create sales taxes to subsidize the public service bill (Economic Development)
- Dissolve the municipal corporation and have residents pay for the fire and emergency services out of pocket and rely on the county (taxes we already pay) to maintain assets and provide services
Once the opportunity to appropriately develop this corner is gone, it’s gone forever. Atherton, CA is a town 100% funded by property tax, and Paradise Valley, AZ is a town with 13 resorts paying all the bills. Both communities have the highest residential property values in their respective states. Everywhere else falls somewhere in between. I know the first reaction is to say, let’s cut costs. I assure you, this town has run lean from its inception, and the desire to add services and infrastructure, like a park, is only growing. The list of the Town obligations only grows.
I took the extra time to write this, because no one is out to ruin Carefree, and a great deal of care went into creating a Special Planning Area at the NW corner of Tom Darlington and Carefree Highway. This was an extremely important and difficult decision for Carefree. The process was specifically designed to have restrictive guidelines and holds whoever tries to develop accountable to what is acceptable. This is unlike the Hampton site, which was hard zoned by the original Carefree Developers in the late 50’s.
You and your neighbors, by design, have extensive control over what gets developed at this location, which would probably require a two-year process just for approval. If no one likes the proposal, it doesn’t get approved. If somehow it gets approved, and people don’t like it, the community can vote on it.
There is no application for any development on this site at this time.
I hope you find this information helpful in understanding. If you read this letter thoughtfully and still believe that the Town has acted irresponsibly, I will respect that. All I ask is that you offer an alternative that allows Carefree to not create commercial development, and still meet its fiscal and public safety responsibilities. Or, offer alternatives or ideas for more suitable commercial development.
I am available to discuss this with residents further. My phone number is listed below.
Thanks,
Steve Prokopek
623-694-2605
Carefree Unity 