April 22, 2009

In a surprise move Tuesday, the Tucson City Council made interim City Manager Mike Letcher the permanent leader of the city with almost no discussion.

The council's 6-1 vote came just after Letcher submitted his first recommended budget to the council, one that included $17 million in tax increases. Councilman Steve Leal, who attended the meeting by phone, voted no.

Letcher's recommendation, which requires council approval, hits renters with a new 2 percent monthly fee on their rents — a $144-per-year cost for someone who pays $600 a month. Landlords, in addition to collecting those extra taxes for the city, would be expected to pay a new business-license fee.

Getting healthy would cost more, with new taxes on gym and health-spa memberships, and another on tanning salons.

Utility bills also would go up, as proposed tax increases on Tucson Electric Power, Southwest Gas and Tucson Water are legally passed through to ratepayers. In the case of Tucson Water, the new tax would be bundled in with an anticipated 10 percent rate increase. The city garbage fee would go up 3.5 percent to $14.50 a month.

Letcher said the taxes are needed to maintain service levels for police, fire and parks.

"This is a hard time to be asking the public to increase revenues, but we've got to ask," Letcher said. "Paramedics and police and parks — these things cost money."

However, Letcher's budget doesn't provide for an increase to police, fire and parks budgets — those departments' budgets are down $4 million, $3 million and $4 million, respectively. In fact, Tucson Police and Fire department employees are paying higher pension and health-care costs — just like all city employees — and had their uniform allowance cut in the budget.

Instead, Letcher's budget says tax and fee increases are earmarked to save services that would have been cut in the budget proposed by former City Manager Mike Hein, who was fired two weeks ago.

The services Letcher restored or added to the budget include $4.3 million in higher employee costs, $3 million in restored cuts to outside agencies, $2 million for a new contribution to the housing trust fund, $1.5 million for the city's rainy-day fund, and a $2 million increase in the city's contribution to its pension fund.

Despite the new $2 million increase to the city's affordable-housing trust fund, Letcher said there are no new services in the budget. He said the housing trust fund is an existing service, not a new one.

The rental tax represents the majority of the $17 million in new tax revenues. Letcher proposes assessing it on the owners of three or more rental units to raise $10 million annually. He said Tucson is one of only three cities in Arizona without the tax.

Water rates and a new "in lieu" tax on Tucson Water property would combine to bring in about $11 million, with garbage-fee increases adding another $1 million.

When asked if the rental tax is an unfairly regressive burden on the poor, Letcher said the question insinuated that renters are poor. "All people that rent aren't poor," he said.

The $3.4 million proposed increase for utilities that use city right of way would increase city residents' TEP bills by $9 a year for a customer whose bill averages $100 a month.

Although utility companies, which are regulated by the state, are allowed to pass those taxes on to customers, Letcher said he couldn't speculate on whether the utilities would do that.

There is no recommended increase in Sun Tran bus fares, the issue that led the council to threaten to fire Hein last summer. Letcher's budget also cancels the layoffs Hein recommended to come from combining the city's planning and development services departments.

Letcher said those employees will now get jobs elsewhere in the city and won't have their pay cut.

The council lavished praise on Letcher as it voted with little discussion to install him as the permanent city manager. The vote was taken without going into a closed-door executive session, which had been scheduled.

Letcher, the longtime deputy city manager, moved into the city's top administrative position after Hein was fired.

He had submitted plans to retire in November but has agreed to delay his departure. He currently makes about $187,000 a year, but his new salary will be negotiated.

City Attorney Mike Rankin said Letcher's agreement with the council cannot include a defined time period, per the City Charter. Letcher said he would stay on as long as the council wants him.

Councilwoman Nina Trasoff, who made the motion to keep Letcher permanently, said Letcher attended a town hall meeting at her office, and she found him "thoughtful, extremely competent, thorough and good." She later said he was great, not good.

Councilwomen Karin Uhlich and Regina Romero, who said last week that they supported an immediate national search to replace Hein, also praised Letcher profusely.

Uhlich said everyone else on the council wanted to elevate Letcher, and given her confidence in Letcher, "this action made perfect sense." She said she hopes Letcher serves for a long time.

Letcher submitted a $1.3 billion budget to the council, an increase of less than 0.5 percent over last year. That total includes just over $1 billion in operating expenses — $424 million in general funds from local taxpayers and the rest from state and federal grants and other sources — and $295 million in capital, or construction.

The city's budget includes $67 million in federal stimulus money that Tucson has been told it will receive.

Contact reporter Rob O'Dell at 573-4346 or rodell@azstarnet.com.