Phoenix exploring options with potential budget shortfall in 2025

PHOENIX — With potential budget cuts on the way, the city of Phoenix is looking into options to uphold a mandatory balanced budget for the 2025-26 fiscal year.

The city council said it intends to increase transaction privilege tax and sales tax by up to 0.5% while it determines the scope of its budget. Council members will hold a meeting on March 18 to vote on the proposed tax increases.

If the tax decision is approved, it would go into effect on July 1.

Considering that the general transaction privilege tax rate has not been raised since 1986 (1.2%), the move would be largely unprecedented.

The Phoenix City Council is scheduled to vote on a proposed increase in Transaction Privilege Tax (TPT) and Use Tax Rates. The vote is scheduled for the Policy meeting on March 18, 2025 at 2:30 p.m., Phoenix City Council Chambers, 200 W. Jefferson St. https://t.co/VW9VQlsSce. pic.twitter.com/YevAU27DlB

— City of Phoenix, AZ (@CityofPhoenixAZ) January 15, 2025

Phoenix operates with roughly a $2 billion general fund. The city said even with a hiked tax rate, it would still fall below existing tax levels in Glendale (2.9%) and Buckeye (3.0%).

The council will release its budget status and forecast of the next few years on Feb. 25.

For statewide context, Arizona Gov. Katie Hobbs signed a $16.1 billion budget last June despite facing a $1.4 billion shortfall. The budget saved money in areas of higher education spending and state agency funding.

How can Phoenix residents learn about the budget options?

Local residents can use an interactive software, FundPHX, to better understand the budget as it is and will be constructed. Through the tool, residents can submit recommendations for where money should be allocated, and conversely, where it should not be invested.

In April, the budget’s numbers will be updated and all recommendations will be rolled over to the next fiscal year.

The city council referenced the ongoing Los Angeles fires as yet another reason for making sure the budget is flexible enough to handle the unthinkable. Regardless of the projected budget shortfall, Phoenix will be committed to addressing public safety and the growing homeless population.

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