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Tempe budget update: FY25 fund balances above policy but FY26 faces rental-tax and state-share pressure
Summary
City staff told the Tempe City Council the city's major funds closed fiscal 2025 above council financial-policy targets, but fiscal 2026 will reflect the full loss of the residential rental tax and a small annual reduction in state-shared revenue tied to San Tan Valley's incorporation.
Deputy City Manager Lizette Camacho and newly hired Municipal Budget Director Robert Baer briefed the Tempe City Council on the city's fiscal outlook, saying fiscal 2025 ended with major funds above the council-adopted financial policy but noting revenue risks for fiscal 2026. "This fiscal year is the first year that we'll see the full impact of the loss of residential rental tax," Camacho said, describing an estimated 9% revenue loss across the general, transit and arts-and-culture funds.
Why it matters: the general fund is the city's largest operating fund and relies heavily on local taxes and state-shared revenue. Camacho said local sales taxes account for roughly 48% of general fund revenue and state shared…
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