Phoenix unveils FY 2025–26 trial budget, cites state revenue losses and proposes TPT increase to plug gaps

City of Phoenix officials on Wednesday presented a trial budget for fiscal year 2025–26 that responds to sharp state-driven revenue losses and outlines steps to protect public safety, homelessness services and water infrastructure.

Laurie Baze, assistant city manager for the city of Phoenix, told attendees the city is facing “a $39,000,000 shortfall, largely due to actions taken by the state legislature,” and that projected losses from the state ban on residential rental sales tax will total an estimated $285,000,000 over three years. The trial budget aims to close gaps through a combination of previously approved tax changes, departmental reductions and planned bond issuances.

The trial budget matters because it sets the proposed spending plan the city will refine before the City Council’s formal vote. The administration said the plan seeks to avoid deep cuts to core services, protect public safety staffing and maintain homelessness shelter and relief operations while planning capital investments.

Officials and staff described the revenue pressures driving the plan. Baze said the state changed the income tax formula “from a tiered system to a flat tax rate” and “the state also has banned cities from collecting residential rental tax,” producing substantial revenue shortfalls. City staff reported departmental spending reductions of $24,000,000 and noted that without additional local revenue the council would have faced further service and job cuts.

City leaders pointed to a March 18 City Council vote to raise the transaction privilege tax (TPT) rate from 2.3% to 2.8%, effective July 1, 2025, as a primary revenue response. Baze explained the change’s local impact as “for every hundred dollars it equals about 50¢ and does not apply to groceries.” The council vote was referenced in the hearing; the transcript did not include the vote tally or mover/second details.

The trial budget includes proposals to issue excise-tax–backed bonds to fund public-safety capital needs, including two new fire stations in Districts 1 and 2 and additional apparatus. Vice Mayor Anne O’Brien said while exact sites were not finalized, in District 1 the city is “looking in District 1 for it to be around the Peoria And 30th Avenue alignment.” Officials said adding stations and apparatus is expected to reduce critical fire response times “from about 8 and a half minutes to under 4 and a half minutes.”

Officials also highlighted near-term operational and service items in the trial budget. Baze noted the Phoenix Fire Department’s Community Assistance program recently met a staffing milestone: “as of Monday, the program achieved its goal of having a behavioral health dispatcher available 24/7.” The proposed budget allocates revised estimates of $4,500,000 in general fund resources for the Office of Homeless Solutions for FY 2025–26 to continue shelter operations, including Rio Fresco, the Phoenix Navigation Center and the Washington Shelter, and support heat-relief efforts as some federal pandemic-era funding ends.

The trial budget further proposes a $5,600,000 addition to non-general funds for the Water Services Department to reopen the Cave Creek Water Reclamation Plant and expand wastewater treatment and water-purification capacity.

Members of the public who spoke at the hearing supported the budget’s public-safety elements. Joe Moreno, representing Local 493, said he was “here to support the proposed budget for the fire department” and emphasized that added staffing and equipment will help reduce response times. Long-time District 1 resident Stan Bates told the hearing he “fully support[s] our Phoenix fire department, our Phoenix police department, and the gated alley program” and urged rehiring neighborhood community-action officers.

Next steps and deadlines were provided to attendees: Amber Williamson, budget and research director, will present the trial budget to the City Council on May 6, and the council is scheduled to vote on the budget on May 21; the city said legal adoption of the budget is scheduled for June and the property-tax levy ordinance will be adopted in early July. Baze invited public feedback through phoenix.gov/budget and the city’s community hearings and online tools.

No new ordinances or final council actions were taken at the hearing itself; speakers and staff used the session to explain the trial budget and collect public comment.

The hearing closed with Baze thanking attendees and encouraging public input as the budget moves through the council process.