Municipal CFO Series: Carmen Arrieta-Candelaria, El Paso

Carmen Arrieta-Candelaria is the Chief Financial Officer for the City of El Paso, Texas, the nineteenth largest city in the United States. She has served in this capacity for over seven years and has worked extensively in the government sector throughout her career. She currently oversees a budget of over $693 million.

El Paso is located just north of the crime and violence-afflicted city of Ciudad Juárez, Mexico. Has the Emergency Border Security Supplemental Appropriations Act materially reduced the city’s financial burden stemming from policing spillover violence from Mexico?

El Paso is the safest city of 500,000 people or more in the United States. We have a strong commitment to public safety; it is the largest component of our budget. Additionally, El Paso has a robust law enforcement presence outside of the city’s own police force. The United States Army, US Customs and Border Protection, US Customs and Immigration Enforcement, city police, and the sheriff’s office are all active in our city. We also have law enforcement in the school districts including the University of Texas at El Paso (UTEP) and community colleges. The Act supports the city’s effort to prevent the violence from spreading into El Paso.

El Paso’s FY 2012 Budget Book details the recommendations of the city’s law enforcement consultants, MGT of America, to develop a more proactive police force. Is increased police presence a high priority for the city? Does the city have the resources to fund MGT’s recommendations?

Strong police presence has always been a high priority of the City. One of the recommendations of the study was to have a more proactive police force and one of the ways that the City and the chief of police promote this policy is through community policing. The study indicated that only 26.5% of the on-duty time for patrol officers was available for proactive patrol activities, considered to be low in comparison to other cities. In other words, we would need more staff, i.e. more money, in order to implement this particular recommendation.

Overall, I think there were good recommendations that came from the study and we are currently reviewing the report in its entirety to see if opportunities for efficiency gains in other areas can offset the need for additional police officers in this particular area. However, we will continue to try and find the resources to ensure that our community is safe and that our police force has the resources and manpower it needs to do its job. For example, the budget staff programmed two new academies in the 2013 budget and we’re getting ready to graduate the largest academy that El Paso has had in several years.

The city intends to fund 72 percent of its new baseball stadium by increasing the state occupancy tax rate, which will be borne exclusively by visitors to El Paso. What are your projections for how this recently approved tax increase will affect El Paso’s tourism industry?

We don’t think that the imposition of the additional two percent occupancy tax will significantly impair the occupancy rate. The average room rate is $70, so the two percent increase means that the average tax is only $1.40 per night. Although the 17.5 percent occupancy tax would now be the highest rate in Texas, we felt that because the average room rate was so low the impact would be minimal.

Furthermore, every year for the last five years the revenue from the hotel occupancy tax has grown at an average of 5.29 percent per year. The model that we use assumes three percent growth. The occupancy rate has dropped, but that’s because we have more hotel rooms. The occupancy rate is incredibly high. We’ve been bringing in some really big things to the convention center. In 2015, for example, we are bringing in the US Men’s Bowling Championships, and we just hosted the Women’s Bowling Championships.

Because of the nominal bump in cost imposed by the tax increase, coupled with the healthy volume of visitors to El Paso evidenced by our occupancy tax revenue growth, we feel that the increase will have minimal impact on the tourism industry in El Paso.

How many people need to attend games to meet the city’s $25 million profit projection for the baseball stadium, and why has the stadium become such a prominent part of the city’s development strategy?

We took an average of the Pacific Coast League’s attendance per game and it came out to about 6,000 tickets. And if you multiply that by a 72 game season, you get 432,000 tickets sold. The stadium is not yet built, but it’s projected to hold between 9,500 and 10,000 people. So, we expect to sell out about two-thirds of the stadium on average. Our projections are based on El Paso’s Core Based Statistical Area, which includes roughly 650,000 people in the city and 800,000 in El Paso County. Our projections don’t take into consideration 1.3 million people in Juarez, who come over to shop and eat as well as attend events like the Sun Bowl and other sporting events. Additionally, one of the team owners is from Juarez, which might help increase attendance.

El Paso’s City Charter mandates a balanced budget. How does the city manage to maintain both city services and a balanced budget in such a challenging economic climate?

I think we’ve taken a very conservative approach to how we run our budget. And what we’ve tried to do is make small increases into the budget, easing things in slowly, instead of the significant jumps that other city budgets have had. Because of our balanced budget, our revenues have to equal our expenses. Obviously a big component of that is property taxes. We haven’t seen the significant property assessed valuation growth that some of these other cities have seen; in El Paso growth has remained steady. We’ve seen some new construction, some growth in assessed valuation, but it’s capped at 10 percent in the state of Texas. We also have a very aggressive expenditure oversight program, which we watch closely every month. Additionally, we do mid-year adjustments to ensure we end up in the black.