Maricopa proved prescient in adopting emergency fund

Jun 6, 2020

Ricky Horst — City Manager Rick Horst said the increase in the hotel tax will benefit the city by taxing tourists rather than residents. Photo by Raquel Hendrickson

When Maricopa City Manager Rick Horst recommended the city council adopt a General Fund Disaster Contingency Reserve last year, it was more from experience than prophecy.

Having worked for cities hit by wildfires, earthquakes, floods and hurricanes, he already knew a thing or two about disasters. That included long-term impact on government revenue.

The disaster reserve was one of several fiscal policies adopted in 2019.

“It’s a little bit convoluted, because we have our regular reserve, which we have set at a minimum of 30% of the general fund,” Horst said.

Council put $1 million in the disaster contingency fund. The emergency reserve is for any declared emergency to provide support for recovery efforts as directed by council.

“The mayor did declare an emergency regarding the COVID, so we are authorized to use those funds,” Horst said. “We’re not sure we’re going to have to use them, but they’re one of the contingencies in case we find that our revenues fall shorter than we anticipated as we move into our next fiscal year.”

According to Pew Charitable Trusts, half of the nation’s largest metropolitan areas do not have emergency reserve funds. Well-managed, such a fund can help a city’s credit rating, Pew research found.

Maricopa’s new budget for fiscal year 2020-21 will have six to eight different trigger points to put the fund to use in case revenues are not stabilized. While sales tax revenue mostly remained strong through March and April and real estate has been highly active, the eventual impact on municipal revenue is only a guess.

Reducing planned additional expenditures comes before dipping into the emergency contingency funds.

“We have the ability to not hire new personnel, not move forward certain new projects, other expenditures, so there’s a number of items before we get to this,” Horst said.

Then, if the cost of a disaster compromises city services, the emergency reserve kicks in.

“Before we would cut services or existing staff we would tap into this fund,” Horst said.

This story appears in the June issue of InMaricopa.