At a March 18 Phoenix City Council Policy Session, City Manager Jeff Barton presented the 2025-26 City Manager’s Trial Budget for council review. Included in the budget is a proposed half-percent sales tax increase to help the city cover a budget shortfall for the 2025-26 fiscal year.
The city says that the tax increase will help offset ongoing revenue losses from state actions, provide necessary resources for additions to the budget for the Fire Department and homelessness services and preserve existing programs and services provided by the city.
When presented Feb. 25, the General Fund budget outlook for FY 2025-26 reflected a baseline deficit of $(36) million. That number was updated in March to $(39) million. February’s projected shortfalls in FY 2026-27 of $(83) million and in FY 2027-28 of $(6) million. The city says that this is primarily due to the state’s actions to eliminate residential rental sales tax (SB 1311) and to lower the individual income tax rate to the flat tax of 2.5 percent (SB 1828).
At the March meeting, Barton emphasized that, last year, there was an $80 million surplus, which the council voted to preserve to address actions at the state level. He added that last February, when the multi-year forecast was presented, absent state action, FY 2025-26 was balanced and 2026-27 was projected to have a surplus.
“I say that to illustrate that what we are talking about today is not because we overspent or because you acted irrationally as it pertains to our finances,” Barton said.
After a presentation that broke down the 2025-26 general fund status, budget consideration, balancing strategies and the proposed budget, the council voted 8-1 to increase the TPT and Use Tax Rate from 2.3 to 2.8 percent, effective July 1, 2025. The policy session can be viewed at www.youtube.com/user/cityofphoenixaz.
In a statement released after the March 18 meeting, Councilwoman Laura Pastor, District 4, said, “Today I joined my colleagues in voting ‘Yes’ on a sales tax increase because it is the responsible choice to protect the services our residents depend on.
“With shrinking city revenue due to state-level tax changes, this increase will help fund public safety, maintain road repairs, and support vital programs for our most vulnerable neighbors – keeping Phoenix safe and thriving for everyone who calls it home.”
A series of 12 community budget hearings will take place throughout the month of April to gather resident input. North Central residents can attend a D4 event April 2, 6 p.m., at Steele Indian School Park Memorial Hall; a D3 event April 10, 8:30 a.m., at Sunnyslope Community Center; a D6 event April 14, 8:30 a.m., at Devonshire Senior Center. Communitywide hybrid (virtual and in-person) events will be held at City Council Chambers April 1, 6 p.m., and April 5, 10:30 a.m. (bilingual presentation).
On May 6, the city manager will present a finalized 2025-26 budget; the council will make a decision on the budget on May 20, with final adoption in June. Information on the budget and hearing dates can be found at www.phoenix.gov/budget.
