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Tucson, Arizona | Published: 05.13.2007
Consumers aren't the only ones hit in their wallets as gas prices rise. So are governments and school districts — and higher costs for them mean less in services for taxpayers.
In the past year, Tucson lost $600,000 that would have been spent on hiring police officers and firefighters and improving parks and roads.
Pima County — which is more than $500,000 over budget this year because it failed to anticipate higher gas prices — skimps on replacing non-essential vehicles and hopes that prices subside so it won't be left with a shortage of vehicles.
Oro Valley pays for increased gas costs by having individual departments spend less in areas where they can cut back, such as training and office supplies.
"There are some things you can't go without," said Lory Warren, an Oro Valley streets superintendent. "You can't run a town without gasoline."
Flowing Wells Unified School District expects to cut as much as $30,000 for maintenance and operations because of high gas prices.
"We are having to earmark additional dollars out of our maintenance and operation budget in anticipation that prices will continue to go up. In essence, you have to take money from somewhere else," said Flowing Wells Superintendent Nicholas Clement, adding that the $30,000 is equivalent to the salary of one teacher.
Tucson Finance Director Jim Cameron said the extra money spent on gas could easily have gone toward the pillars of the city's 10-year "financial sustainability" budget program: police, fire, roads and parks.
"It could have gone to improve services," Cameron said.
Local governments do not lock in gas prices in long-term contracts, instead paying the average regional price, as determined each week by the Oil Pricing Information System (OPIS), minus 3 cents.
Tucson, Pima County, Sun Tran, Van Tran, Oro Valley and Northwest Fire District all are in a contract together with Phoenix Fuel Co., while Sahuarita and South Tucson buy gas from Pima County and pay an extra cent on top of the county's price.
Last week, they paid $2.75 a gallon for unleaded and $2.48 for diesel. Local governments pay less than the rest of us do at the pump because they are exempt from most taxes.
The state of Arizona has spent $7.4 million statewide so far this fiscal year for fuel, paying $2.89 a gallon for gas and $2.62 for diesel in the first week of May.
"This year we had to scale back on buying much needed equipment to pay for rising fuel costs," said Teresa Welborn, spokeswoman for the Arizona Department of Transportation, which negotiates the fuel contracts for all state vehicles.
However, Welborn couldn't say what the state is paying for fuel right now, citing the "numerous fuel sites and the ever-changing" OPIS numbers, making it so "a concrete number cannot be determined." That's the same reason she gave for not providing the price paid the past two years. The department also could not say how the state budgets for fuel costs.
School districts are all over the map in how they pay for gas.
Catalina Foothills Unified School District is billed for its gas by the company that owns the buses. District officials don't know exactly the per-gallon price they're paying, but said the bills have not changed much the entire school year, indicating that the company seems to have negotiated a steady price.
Sunnyside Unified School District has a standard government contract, said Rick Pederson, the district's transportation director, adding that he is working with the district's 81 bus drivers to conserve at least a gallon of gas each week.
Vail Unified School District uses pre-approved state contracts, but negotiates a new fuel price every month. Amphitheater Public Schools' gas prices are tied to a wholesale cost index that fluctuates throughout the year because of a consortium it joined with the region's largest school district, Tucson Unified School District.
Bill Ball, TUSD's director of transportation, said TUSD arranged the buying consortium with other districts to wrangle a better price on gas, which he said is a couple of cents below what the state buying consortium yields.
Most governments and districts previously used long-term contracts as a way to hedge against surprises in fuel prices, but as fuel prices have run up so much in the past several years, it is no longer the norm in Southern Arizona.
Ball said the days when school districts and municipal bodies were shielded from highly fluctuating gas prices via annual purchase rates are gone.
Trying to lock in prices through long-term contracts is like trying to beat the house in Las Vegas, said Pima County Procurement Director George Widugiris. That's why local governments take their chances with fluctuating market prices.
"I think this is a very common and very fair way of doing things," he said. "If we had locked in a price of $2.75, we'd be feeling really good right now, but the vendor would be hurt. On the other hand, if the price had gone down to $2.50 or $2.25, and we had locked in $2.75, we'd be feeling pretty foolish."
Projections important
Just as important as the increasing gas prices are the projections governments make in their budgets on how much gasoline will cost them.
For example, Tucson failed to account for the run-up in gas prices in its 2006 fiscal year budget, when its costs totaled $13.3 million, forcing it to find the money to fill in the gap. It did, with a partial hiring freeze.
"It was a problem last year," said City Manager Mike Hein.
Tucson has since earmarked an extra $1 million in reserves to cover unexpected fuel costs, in addition to the extra $600,000 it spent this year on gas.
It estimates it will pay $2.15 per gallon next year (based on a retail price of $2.40 when taxes are added).
Pima County is $500,000 to $1 million over budget this year because it didn't anticipate higher gas prices. It doesn't anticipate higher gas prices next year either, estimating that it will cost the county an average of $2.29 a gallon (about $2.55 retail).
Oro Valley, Marana, Sahuarita and TUSD all said their gas expenses were up this year, but added they are not over budget because they anticipated higher fuel costs. Those three cities believe their fuel costs will be even higher next year.
TUSD paid $1.78 million for gas this year through April, said transportation director Ball. That's less than the $2.5 million that was budgeted for fuel this year, he said, though school's still in session and there are summer routes to consider, too. In the 2005-'06 school year, TUSD spent $1.95 million on fuel; in the 2004-'05 school year, it was $1.19 million.
Ball said TUSD purposely overbudgeted this year knowing gas prices would go up.
"I've been very, very, very lucky with budgeting this stuff in previous years," Ball said. "But finally I felt like the luck was going to wear out, so finally I told finance to add some extra money."
more driver quotes, page A4
● Star reporters Erica Meltzer, Andrea Kelly, L. Anne Newell, Josh Brodesky, Danielle Sottosanti, Aaron Mackey, Andrea Rivera, and Jeff Commings contributed to this story. ● Contact reporter Rob O'Dell at 573-4240 or rodell@azstarnet.com.
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