Beginning in 1970, Fountain Hills was established as a master planned community by McCulloch Properties (now MCO Properties, Inc.). Residents of the planned community contributed to the cost of road construction by paying assessments to a Road District. Since 1989, when Fountain Hills was incorporated, there has not had a primary property tax – and voters have repeatedly refused to approve one.
Currently the Town has only two primary and one secondary resource to fund its government responsibilities specific to streets. It has no property tax to support street needs. A more detailed explanation is warranted:
· The primary resource remains general fund revenue. Its application to funding street programs is at Council discretion, as there are other Town needs that also are funded from this primary resource. The Town’s general fund includes state-shared revenues, local sales taxes, and some miscellaneous fees.
· Another primary resource is the Highway User Revenue Fund (HURF), a state generated fuel tax that is levied on gasoline and diesel sales. It is then redistributed by the state to cities, towns, and other municipalities, similarly based upon a population share. The importance of this fund is that it must be used to support highway, street, or road projects. With few exceptions, it cannot be used for anything else. BTW, the state and federal fuel tax rates have not changed in more than 20 years.
· The secondary resource is generated through the Regional Transportation Tax from Maricopa County. Now in its third 20-year iteration, just passed in 2024, it provides some transportation funding for maintenance and repairs to FH, primarily for “roads of regional significance” (arterials), some public transportation solutions, and some other minor options. The tax provides programmed funding over 20-year period, and FH gets most of its small share of funding for streets in the last five years of the program (2040-45). This fund, too, is limited to “transportation” programs.
· It’s important to note that the Town has no local property tax. FH remains a step behind many communities in its ability to fund ANY Town-related program, including streets, because it lacks the revenue generated by that important taxing option — which would probably best be categorized as a general fund revenue. A Town property tax could fund a variety of Town capital programs, including streets. (Recall, property tax assessments existed until the dissolution of the Road District in 1989 and the Fire District in 2001). I will say that this lack of potential revenue severely impacts the Town’s ability to meet citizen wants and needs for streets, as the Town must use “general fund” revenue to replace lost Road District property tax revenues since 1989.
With the understanding of those baseline revenue options, here’s a history of the Town’s efforts (with associated leadership) in identifying some other available revenue options and what has happened over the years to find ways to finance public safety, streets, and other needs — in concert with existing revenue sources.
For instance:
· 1989 (at Incorporation, the County Road District was disbanded and the dedicated property tax was lost) (Mayor Cutillo)
· 1998 McDowell Mountain Preserve Bond passed (Mayor Miles)
· 2001 Fire District disbanded (Mayor Miles)
· 2002 Property Tax failed (Mayor Morgan)
· 2002 Council authorized Sales Tax implemented at 1% (Mayor Magan)
· 2003 Property Tax failed (Mayor Nichols)
· 2008 Storm Water Environmental Fee, eventually rescinded (Nichols)
· 2008 Property Tax failed (Mayor Nichols)
· 2008 Council authorized Sales Tax raised to 2.7% (Mayor Nichols)
· 2011 Street Bond failed ($28M) (Mayor Kavanagh)
· 2014 Saguaro street-only bond passed ($7M) M (Mayor Kavanagh)
· 2018 Property Tax failed (with a Council Resolution to put all proceeds to public safety only) Mayor Kavanagh
· 2019 Council authorized Sales Tax raised to 2.9% (Mayor Dickey)
In short, in 2018, voters were asked to approve a primary property tax that would have generated an additional $7 million in revenue, with $4 million committed to street repair and maintenance. That measure failed by a 60-40 margin. A 2011 initiative to obtain funding for necessary street maintenance and repair through a bond also failed.
For more than 40 years, the funds available for allocation to the maintenance of streets and intersections have been drawn from: the General Fund (including sales tax revenue), state shared revenues, regional funds and grants. Since 2016, only $14.8 million has been allocated to street maintenance. Approximately 70% of that $14.8 million has been spent in the past six years, as the Mayor and Town Council have attempted to compensate for years of deferred maintenance resulting in a backlog of streets in need of repair. However, increasing the amount allocated annually to “pavement management” has not been sufficient to address the backlog of streets needing repair and the ongoing cost of maintenance.
Of note, since 2019, the Council has not authorized a sales tax increase or authorized for a public vote for a property tax or bond option to secure additional funding. BTW, The Town has zero debt today (and has had zero debt for several years now.)
According to one recent report, the Town’s current budget of $2.125 million annually is insufficient to maintain the streets in their current condition. According to the same report, the annual allocation of funds for repair and maintenance would need to be more than doubled (to $5 million), to address the growing backlog of streets in need of repair and improve the overall condition of the pavement.
In September of 2021, the Town Council formed the Citizens Advisory Streets Commission. CASC was tasked with assessing the condition of the town’s streets and providing its findings and recommendations to the Town Council. The members of CASC were well qualified to take on the task assigned to them. Collectively, these community volunteers had experience and expertise in civil and municipal engineering, transportation, roadway construction, infrastructure repair and replacement, the public sector, and business management.
Over a 20-month period, CASC reviewed the construction history of the streets, analyzed prior studies of street conditions commissioned by the Town, physically inspected street conditions, developed an understanding of how street conditions are determined, and explored the available funding alternatives. In November 2022, the Town contracted with the firm, Roadway Assets Management (RAS), to conduct a comprehensive review of the current condition of the streets and provide a report and recommendations to CASC, staff and the Town Council based on its findings.
In June 2023, CASC presented its report and recommendations to the Town Council. In November 2023, RAS presented its report and recommendations. Within its borders, Fountain Hills has approximately 166 miles of pavement that it is required to maintain. The condition of streets is described by reference to a Pavement Condition Index (PCI).
Network Pavement Condition Index (PCI) Average Range rating scale according to RAS (2023)
o Overall network average: 60 – 65 pci
o Excellent (86 – 100 pci) =16.4%
o Very good (71 – 85 pci) = 32.5%
o Good (61 – 70 pci) = 18.5%
o Fair (51 – 60 pci) = 16.1%
o Marginal (41 – 50 pci) = 10.2%
o Poor (26 – 40 pci) = 5.7%
o Very poor (below 25 pci) = 0.6%
o Pre-incorporation asphalt average: 56 pci w/backlog 14%
o Post-incorporation asphalt average: 75 pci w/backlog 1%
Many of the streets in the poorest condition are found in the areas of the town’s earliest development. According to CASC, substandard construction practices by the developers is one of the causes for many of the failing streets. Prior to 1989, before Fountain Hills was incorporated, the developers were not required to comply with established road construction standards. Many of these streets are now reaching the half-century mark – and it shows.
CASC’s conclusion that age and substandard construction is a significant contributing cause of the town’s failing streets is confirmed by the RAS assessment. Compare the PCI ranges in these two charts:
As evidenced by this comparison, the streets that were built prior to the incorporation of Fountain Hills are in direst need of attention. Not surprisingly, repairing and, in some cases, rebuilding these streets is likely to consume the majority of the funds committed to pavement management over the next five years.
The poor condition of the pre-incorporation streets is not our only concern. As summarized by CASC in the overview to its June 2023 report: “The streets in our town are falling apart; half the network is substandard. Even streets that are in good condition are subject to deterioration and must be maintained. The problem today is the result of ignoring what should have been done years ago and without an influx of capital, continual deterioration will exceed the town’s ability to sustain the network.”
It is clear that the streets cannot be fixed; nor can further deterioration be prevented, unless there is a significant increase in the funds currently allocated to street maintenance, repair and reconstruction.
According to CASC, “without significant additional revenues, street maintenance levels cannot be achieved, which means streets will continue to deteriorate, creating failing conditions from which the town cannot possibly recover.”
CASC made a workable proposal, but not necessarily to the satisfaction of Town leadership to date.