Tucson council begins FY26 budget and pay-plan process, starts transit fare equity study and water-rate notice

Tucson City Council opened a long study session April 8 with an initial presentation of a recommended compensation plan that city staff said is intended to correct pay-range placement and add an annual pay-progression while introducing organization-wide performance reviews. City leaders also heard an updated look at the FY26 budget that reflected weaker sales-tax expectations and a larger projected starting deficit, and they directed staff to begin public outreach on several transit and revenue items.

The compensation plan presentation, led by the city manager and Human Resources Director Dr. Terry Train, outlined three linked elements: in-range pay placement for incumbents using a base-pay calculator and employee records in Workday; annual pay progression proposed at 1.5 percent; and market adjustments phased over three years for job classes judged below market (with police and fire receiving a specially negotiated schedule). Staff said the FY26 general-fund cost of the recommended package, including employee-related expenses, would be about $13.6 million (roughly $21 million citywide including non-general funds), with a multiyear funding profile that could total about $60 million over three years.

Why this matters: city managers argued the steps address long-standing compression where new hires sometimes earn more than incumbents and aim to modernize hiring offers, career-path documentation and performance management via Workday. Staff emphasized the effort is a multistage process: initial performance reviews and in-range placements this summer for roughly 896 incumbents, data clean-up through next spring, and ongoing annual maintenance.

Budget context — nut graf: city finance staff told the council the financial environment has shifted since earlier forecasts: recent sales-tax data reduced expected FY26 sales-tax revenue by about $14.1 million compared with prior planning and increased the initial FY26 operating gap to roughly $27–28 million. Staff presented a revised five-year forecast that shows a projected year-end negative balance for FY26 unless the council approves offsetting measures. The council and manager described this as a solvable but urgent fiscal planning problem that will require a mix of spending decisions, revenue options and multiyear thinking.

Supporting details: the manager and CFO outlined the major drivers of the deficit — lower sales-tax forecasts, continuing cost pressure for pay and benefits (including pension impacts tied to public-safety pay), and a set of supplemental and “critical needs” items that the manager recommended trying to retain despite revenue pressures. Those critical needs total about $14.6 million and include: additional sworn police capacity and vehicles; 14 positions to staff day-truck emergency response in the fire department; roughly $500,000 for public-safety communications staffing; an initial $4 million annual contribution to a general-capital fund for recurring capital needs; and targeted investments in violence-prevention and Thrive Zone programming.

Transit direction and votes: Council members approved three related actions on transit. First, the council directed staff to begin the public-notice and equity work needed to consider a major service change that would eliminate low-ridership Route 5 and extend Route 22 to Pima Community College West; staff estimated the route change could save roughly $1 million annually (Route 22 extension estimated at about $550,000 per year) but requires a Title VI equity analysis, public outreach and a public hearing before adoption. Second, the council asked staff to return with implementation processes for a menu of potential transit funding options (partnerships with major institutions, an advertising tax, hotel-motel surcharge changes, a half-percent public-utility tax increase, use of certain state local-transportation assistance funds, and parking-rate changes). Third, the council directed staff to begin a fare-equity (Title VI) analysis of five fare scenarios — restoring the 2018 fare structure, fares for premium services only, a simplified 50-cent base fare, fare capping and a free low-income pass — and to return with results. The Title VI motion passed 4–2; the major-service-change motion and the funding-options direction passed by voice vote.

Why this matters: staff said any reinstatement of fares would require technical changes (fare collection equipment, staffing, and outreach), a Title VI analysis to test disparate impacts on protected or low-income riders and time to implement. Council members who opposed a return to fares urged pursuing non-fare revenue options first, noting the city’s recent decision to run fares free has correlated with a recovery in ridership and accessibility.

Water rates: council also approved a resolution to publish a Notice of Intention to implement a differential water-rate structure for customers in unincorporated Pima County while adjusting incorporated-area rates to keep the overall change revenue neutral. Tucson Water staff and consultants told council that infrastructure and “peaking” (fire-flow and system-sizing) requirements make serving unincorporated customers more costly on a per-customer basis; staff proposed a small-range set of differential options and asked the council to authorize notice and a public hearing (scheduled in June) before final rate action. Staff also proposed modest increases to the green stormwater/green-infrastructure fee and the conservation fee as part of the same process; staff provided example household impacts (the representative 10-CCF example produced a delta on one scenario of about $8.73).

Plan Tucson and What Works Cities: council agreed to begin the What Works Cities self-assessment and to engage the Bloomberg Philanthropies / Results for America What Works Cities technical assistance program; staff said the program is no-cost and intended to help city data and performance practices. Council also received an update on the Plan Tucson general-plan revision process: staff reported extensive community engagement over 18 working-group meetings, release of a revised draft, and an intent to bring a final draft and ballot schedule that would allow a voter decision later in the year if the council so chooses.

Votes at a glance (formal directions recorded April 8) - Route 5/22 major-service-change public outreach: motion to begin process — passed (voice vote). Evidence: study session transcript. - Transit funding-options study: motion to return with implementation processes for a menu of funding options — passed (voice vote). - Fare Title VI equity analysis: motion to begin Title VI (fairness) analysis of five fare scenarios — passed 4–2; staff to return in roughly 60 days with analysis. - What Works Cities: motion to begin self-assessment and enter the program (no-cost) — passed (voice vote). - Water rate differential: resolution to publish a Notice of Intention and schedule a public hearing on differential rates and fee adjustments — passed (roll-call vote unanimous).

Discussion and next steps: councilmembers repeatedly asked staff to pursue non-fare revenue options before reinstating fares, to accelerate community engagement on the FY26 budget, and to provide detailed, line-item options for closing the fiscal gap before final budget adoption. Staff committed to returning with the Title VI fare analysis in about 60 days, to bring a recommended FY26 budget on April 22 (with final budget adoption still scheduled later in the statutory calendar), and to publish a water-rate public-notice and to hold a public hearing on rates in June.

Ending: the April 8 meeting highlighted the tight fiscal choices ahead: the council must balance multi-year compensation corrections and market adjustments for public safety roles against weaker-than-expected sales-tax receipts, while testing new revenue and service-design choices in transit and utilities. Staff and council described the coming weeks as an intense public-engagement and decision-making period before final FY26 decisions.