PHOENIX (CN) — With near unanimous support from citizen speakers, the Phoenix City Council Tuesday approved a 0.5% sales tax increase aimed at supporting Phoenix Fire and homelessness services.
“Our community’s consistent. We want more services, not less,” Kesha Hodge-Washington said as she and all but one member of the Phoenix City Council voted to approve the tax hike.
Facing an imminent deficit of nearly $39 million for the next fiscal year, which begins in July, City Manager Jeff Barton and Budget Research Director Amber Williamson proposed raising the transactional privilege tax on most business activities from 2.3.% to 2.8% to avoid cutting essential services in response to a reduction in city revenue.
That reduction is due in part to two recently enacted laws that reduce the amount the city can collect in taxes. Senate Bill 1828 changed the state’s income tax system from a graduated rate to a flat rate in 2022. A year later, Republican state Senate President Warren Petersen’s Senate Bill 1131 prohibited the city from collecting rental tax.
“You did not create this problem,” Phoenix Firefighter Association President Brian Willingham told the council Tuesday afternoon. “This problem has been laid at your doorstep, and you’re here to address it in a leadership role.”
“This isn’t on them,” he said about the council members, speaking directly to Phoenix residents in the audience. “These cuts that the state Legislature did, they did this to us.”
The increase would shift the city of Phoenix from the median among its metro to having one of the highest sales tax rates, Williamson said, but would help reduce Phoenix Fire emergency response times, which are often double the national standard of 240 seconds from the time of a 911 call.
“Normally I’m not in favor of things like tax increases, but in this case there’s just no question,” Phoenix resident Stan Bates told the council. “You’ve got to be able to maintain the public safety of this community.”
The city’s draft budget, which will be finalized in June, proposes $43 million in additional ongoing funding for the fire department, including funding for a new rescue helicopter, two new fire stations and additional personnel to staff the new stations.
Councilmember Laura Pastor voted to approve the measure but said she hopes the city can do better in the future to support the department without needing to raise taxes.
“I want to get to a point where it’s not a continuous ask, but where we have a plan on how we’re going to fill these positions as we grow,” she said.
The sales tax increase, combined with other proposals to increase revenue in the city’s draft budget, could flip the projected $39 million deficit to a $17 million surplus, which the city would set aside to put toward balancing the next fiscal year’s budget, which is also in danger of facing a revenue shortfall.
Last year, the city set aside an $80 million surplus to balance this year’s budget, but still needs to make additional changes to avoid a deficit.
While many citizens spoke in favor of increasing funding for the Phoenix Fire Department, which combined with police use 64% of the city’s general fund, one resident called the tax proposal a sham to line the city’s pockets.
“Phoenix Fire has been running in crisis mode for at least 10 years,” the woman, identifying herself only as Orla, told the council. “Stop blaming the fire crisis on a rental tax cut that just went into effect this past January. This is just another excuse to use the fire department to get money, give them a small amount and the city takes the rest.”
Orla complained that the city has had opportunities to increase funding for the fire department, yet it “has no problem spending $50 million for shade trees, $37 million on pools and splash pads and $20 million on a multicultural center.”
“Why does the Phoenix Fire Union president stand before you year after year and nothing is done?” she asked. “Now the city wants a sales tax under the guise of solving the fire department response time crisis, but that money is going to the general fund.”
Interim Councilmember Carlos Galindo-Elvira assured residents that the additional revenue would improve public services.
“This tax increase does not increase our city’s treasury,” Galindo-Elvira said. “It helps us balance our budget.”
Councilmember Jim Waring, representing northeast Phoenix, voted against the increase but didn’t explain his position. He didn’t reply to a request for comment.
The city council will vote to approve the budget on May 20 and will host multiple listening sessions for public comment between now and then. The final budget will be approved by June 18.