Attention turns to Flagstaff’s pension fund: Mayoral candidates weigh in

By Naima Schuller Senior Meteor Reporter

March 6, 2020

Flagstaff  As the City of Flagstaff heads into the budget process for next fiscal year, every City Division is doing so in the red. Greg Clifton, the Flagstaff City Manager said during discussion of potential bonds at Tuesday night’s Council meeting, “…we came into the [budget] discussion a couple weeks ago with all the divisions in the negative without a lot of discretionary money [from the General Fund]… Our discussions now are not about the add-ons and increased services. It’s going the other direction. How do we correct the deficit and get back in the black?” (The City is required by law to balance the budget moving forward)

When asked what the process is for assessing the budget and potentially finding solutions to this situation Clifton explained, “We have a budget team, comprised of members of staff, inclusive of management and our finance section, which do much of the heavy lifting in the [budget] review process. The recommendations are vetted at the Division level (we have about 12 divisions), and following that, it goes to Council. So the review, revisions, cuts and so forth, starts at the staff level, and ends up in front of the Council. In the end, the Council has the final say. And typically there are revisions.” He said, “…it’s not just a ‘rubber stamp’ process.“

In recent years the City has not been paying the full share of the pension obligation into the fund. The pension funding issue at the City is the real sticking point when it comes to the Council deciding on a number of potential bond items that may go on the ballot in November.  The fund pays police and firefighter pensions.  Currently, the City owes the fund $111.8 million. This debt, and the fact that Flagstaff fell short of it’s expected sales tax income by almost $1 million during the past fiscal year, have the got the City Council members digging deep for solutions.

At a time when city infrastructure is needing attention, affordable housing is in short supply, and our police and fire pensions are unfunded by $111.8 million. The Meteor spoke to candidates for Mayor this week about how they think the City moves through the pension fund issue.


Meteor: Was the March 3rd Council meeting the first you’d heard of the City divisions starting the budget process all being in the red?
Deasy: Yes.

Meteor: What is the cause of this, in your opinion?
Deasy: This pension debt affects every single other service of government.  This is the number one issue for Flagstaff, and should be a top priority of the Mayor and Council.

Meteor: As Mayor how would you move forward to address the unfunded pensions?
Deasy: We have to address the pension debt head on like Prescott is doing.  It will require a new revenue stream, not just more loans and bonds to transfer the debt to another place.  If we want more funding for anything (parks and recreation, open space, housing, etc), we have to get our debt and spending problems under control.  If not, we are headed towards bankrupting the City in the not so distant future.  If we can’t pay the bill, those with pensions can sue the city for non payment and will easily win. Then it is up to the judge to decide which city assets we’re going to liquidate and how we’ll restructure to pay the bill.  We will lose what little local control we have.  It has to be a sales tax.  No other method can get the sum of money needed.  But, I have a different approach than others.  I want to put on the ballot both a sales tax increase for the pension debt, and another to delay the tax on some infrastructure projects.  I wan to ask the public, “can you wait a few years for the Lone Tree overpass?  Can we wait on the JW Powell extension to 4th Street? Let’s reprioritize our agenda and get our debts paid first.


Meteor: Was the March 3rd Council meeting the first you’d heard of the City divisions starting the budget process all being in the red? 

Odegaard: I will tell you that we do have challenges to have a balanced budget which is required.

Meteor: What is the cause of this, in your opinion?

Odegaard:With rising labor costs, especially with rising costs of the unfunded pension liability, which we need to put an extra $650k out of the general fund towards the liability. We also have a “bill” from the State of Arizona of at least $1.3 million for our minimum wage difference between the State and the City.

Meteor: As Mayor how would you move forward to address the unfunded pensions?

Odegaard: Concerning the unfunded pension liability, the current Council must own up to the liability that we have, and have plan to bring additional revenue to put towards the liability. We cannot pass the liability to another Council as other Councils have done in the past.

It’s our responsibility to make hard decisions. In my opinion the only path forward that any sense is to ask voters of Flagstaff to raise the sales tax that will generate the revenue to pay off the liability. The City of Prescott asked it’s residents the same question in 2016 and they were in better financial position then Flagstaff, and they passed the measure by two-thirds which is incredible with the demographic of Prescott. The question that will be asked of the residents will be a heavy lift and it might cost me my election to become Mayor, but we need to make the ask. If we don’t make the hard ask I have failed as a public fiduciary servant.

Meteor: Was the March 3rd Council meeting the first you’d heard of the City divisions starting the budget process all being in the red?

Whelan: Yes.

Meteor: What is the cause of this, in your opinion?
Whelan: We have big money issues. The way we’re doing things isn’t working. We’ve been taking too much from the General Fund. Council has asked Departments repeatedly to cut non essentials and don’t grow! We’ve asked staff to regulate the general fund money as well, as it is being strained. Like in household finances, we can’t just keep paying the interest – at some point we need to start paying down the principle.

Meteor: As Mayor how would you move forward to address the unfunded pensions?
Whelan: Just cutting back in our departments won’t do the job. We need to grow economic development and get new businesses here. But, we need housing for those workers so it’s really a situation where each piece is dependent on the other.

The first thing I would do is open up a new arterial that would allow for people to by-pass downtown if they are heading east. Complete JWPowell from the airport, that would allow for approximately 32 acres to be developed, perhaps focusing on bioscience, cyber security, healthcare, etc., all around the airport. Also, complete JWPowell from airport all the way over to 4th Street. That would open up land to create housing. We have approximately 64 acres across from Pine Canyon.

Bottom line, without tangible, affordable, workforce housing its really not going to work. We need both…economic development and housing! We need to work in partnership. We work hard at trying to bring businesses here but because of the cost of housing, there’s no place for workers to live. I have positioned myself on many Regional councils just for that purpose, I am a member of NACOG Regional Council, I’m a member of the NACOG Economic Development Council, I’m Vice Chair of the Northern Arizona Municipal Water Users Association.

We need to protect our resources and to determine funding of projects in northern Arizona. We are a STEAM town –  our economic focus should follow that lead; cyber security, biotech, education and training, computer/high tech, health care. I tend to believe that we really need a very focused approach. CCC just opened a cyber security curriculum, NAU has cybersecurity…where are our businesses in cyber security? It would be an excellent way to invite new business into our city, with low impact and high paying jobs.

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