This article is part of a continuing series The Times is running between now and the upcoming property tax election in May. This article provides information related to the proposal to establish a facilities reserve fund.

If the $7 million annual primary property tax is approved by Fountain Hills voters in May, town staff is proposing to set aside approximately $1 million each year for a capital replacement reserve.

Such a fund would be used to pay for ongoing maintenance and replacement of facilities when necessary. While this does not replace a capital reserve fund, it does provide supplemental funds for larger items.

The town had a study done by Capital Reserve Analysts that was completed in 2016. It recommends that the town maintain the fund with an allocation of approximately $1 million annually.

The report’s authors states that the information is a budgeting tool to help navigate uncertain future expenses. It is designed to answer the question, “do we have enough in reserve?” and “how much of a contribution is needed to maintain the fund?”

The study took into account a detailed inspection of properties and elements of town assets to determine estimated remaining life and approximate replacement costs. The study took a long-term view of each component to allow for adequate financial planning.

Taking a 30-year view, the analysis concludes the monthly contribution should be $80,000, or $960,000 annually, with a 3 percent annual increase for the first 10 years and 2 percent for the remaining 20 years.

The town’s parks are the largest asset to be maintained, followed by the Civic Center facilities and fire stations. The Kiwanis Building accounts for a small portion of the analysis. At the time the report was done the Community Theater building was included. However, that has since been sold to the theater group and is no longer the town’s responsibility.

Town Manager Grady Miller said that when the sale was made it was decided that the theater group was in a better position for fundraising to maintain and improve the facility than the town.

The study establishes a test for determining what expenses are appropriate to the reserve fund. They essentially should be major, predictable expenses. It would not be correct to include items that are considered “lifetime” components, unpredictable expenses that would be considered insurance losses and expenses considered more appropriate for the operational budget.

The strategy has the fully funded balance of the reserve increasing as assets deteriorate and age. The fund would shrink as renovation and replacement projects are implemented.

The type of items included on the list of assets range from mechanical, roofing, flooring, interior and exterior paint, furniture, flooring, lighting, kitchen equipment, exterior lighting and parking lot asphalt. Fire department equipment also includes radios, hoses, SCBA, thermal imaging, extrication equipment and defibrillators.

Park equipment ranges from benches to playground apparatus, backstops and field lighting, as well as refurbishing tennis courts and irrigation.

The components of the Fountain and lake include the pump equipment and liner.

While the study includes a detailed schedule for addressing the various items, Miller said staff has the ability to review the annual status to move projects forward or defer if not urgent.

Miller said they hear many people suggest that the town simply bond for such projects and equipment, which he notes is not always practical.

Town Finance Director Craig Rudolphy said the town would use tax exempt bonds and not all of these items are appropriate for that type of bonding.

There are also election and legal fees that go with bond funding that simply increase the costs.

The town has for several years had a vehicle replacement fund, which is similar to the proposed facilities fund. This has worked well for maintaining and updating the town’s vehicle fleet. The town recently transitioned away from some older model hybrid fuel vehicles ,which were proving expensive to maintain as they aged.

Vehicle replacement strategy is relatively simple, based on age and/or mileage. The council has asked staff to look at tweaking the policy with an aim toward saving money.