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Council discusses home rule carve‑out to keep Lake Liner work outside state spending cap
Summary
Staff said Fountain Hills is near its statutory expenditure limitation and proposed a time‑limited, voter‑approved ‘home rule’ exclusion to let the town spend saved funds (and any bonds) on the Lake Liner without consuming the overall spending cap; council favored further study and outreach toward a 2028 ballot.
Michael (staff subject‑matter expert on Arizona’s expenditure limitation) told the council that the state’s Economic Estimates Commission (EEC) computes municipal expenditure limitations from a base amount, an inflation factor and a population factor under Article 9, Section 20 of the Arizona Constitution. He explained that some revenues are excludable (debt proceeds, investment earnings, certain grants) and that carryforwards of excludable revenues retain their excluded character.
Michael reported the town is effectively spending up to its expenditure limitation for the current year and that using excludable carryforwards (one‑time money) to pay for projects such as Palomino has reduced that buffer. For the Lake Liner project staff estimated $17 million in needs with ~$6.6 million saved; only a portion of that saved amount is excludable. To avoid the Lake Liner exhausting nonexcludable spending capacity, Michael presented three broad options: reduce other nonexcludable spending, generate new excludable revenue (e.g., issue debt and use proceeds/carryforwards for debt service), or pursue a voter‑approved change.
Two voter options were discussed. A permanent base adjustment would raise the town’s base limit permanently by a specified dollar amount, granting the greatest flexibility but exposing the change to voter skepticism because it is broad and indefinite. A time‑limited alternative expenditure limitation (commonly called home rule) can be crafted to retain the constitutional limitation but add a targeted exclusion—e.g., specifically except Lake Liner expenditures from the limit for a defined period. Michael and staff recommended pursuing a narrowly tailored home‑rule exclusion for the Lake Liner, placed on the 2028 primary ballot so it would take effect for fiscal years 2030–2033 and provide time for design and public outreach.
Council members debated tradeoffs—permanent flexibility versus political acceptability and control. Several members said voters are more comfortable with project‑specific, sunsetted measures and supported beginning public education and planning; others noted the permanent base adjustment could eliminate the limit as an operational constraint but might fail at the ballot. Council asked staff to return with draft language, communications plans and an implementation schedule; staff said a two‑thirds council referral is required to place either measure on the ballot.
Sources: staff presentation and council Q&A at the retreat.
