Phoenix presents $11.5 billion five‑year capital plan and a trial budget that would rely on a 0.5‑point sales‑tax increase to close a $39 million shortfall

The Phoenix City Council received an overview on March 18 of a proposed $11.5 billion, five‑year Capital Improvement Program and a city manager's trial general fund budget that shows a $39 million shortfall for fiscal year 2025-26.

The presentation, delivered by Amber Williamson, budget research director, and Chris Fazio, deputy director, laid out funding sources and specific program totals and framed a proposed package of strategies that staff say would balance next year's budget if the council approves a 0.5 percentage‑point increase in the city's transaction privilege and use tax (TPT), from 2.3% to 2.8%, effective July 1, 2025.

The CIP and trial budget matter because they set near‑term spending on infrastructure and operating priorities while the council must close a projected structural shortfall that staff say is largely the result of recent state legislation that reduced local revenues.

The CIP totals $11.5 billion over five years, with $2.5 billion proposed for the next fiscal year. Major programs identified include water, aviation, wastewater, transit, street transportation and drainage; the CIP also incorporates projects recommended by the Citizens Bond Committee for the $500 million general obligation bond program approved by voters in November 2023. Williamson said schedule 7 of the preliminary CIP document provides a detailed bond breakdown and that the phoenix.gov/bond site will be updated with project status information.

Breaking the CIP into funding sources, staff described the next fiscal year and five‑year composition as including: $180 million from the general fund, $387 million from the remaining portion of the 2023 general obligation bond program, $2.3 billion in special revenue funds (for example highway user revenues), $2.8 billion in enterprise funds (like water and airport), $3.3 billion in other bond funds (water and wastewater debt) and $2.6 billion in other capital funds such as development impact fees. The plan includes projects such as Sky Harbor improvements, park upgrades, bus rapid transit and a continuation of the pavement maintenance program.

On the operating side, Williamson said the revised general fund resource estimate is $2,040,000,000 and expenditures are estimated at $2,079,000,000, producing a projected deficit of $39,000,000 for 2025-26 after a technical "7 plus 5" update using seven months of actual data. Williamson said the city's largest general fund categories are public safety (64% for fire and police), community enrichment (12%), general government (11%) and criminal justice (9%). Local sales and excise taxes are the largest revenue source at about 40%; state shared revenues are about 37% and are set by state statute.

To address the gap, staff proposed a set of strategies: a TPT increase to 2.8% effective July 1, 2025; a $92 million use of excise tax proceeds and one‑time savings modeled similarly to the prior year; department reprioritizations producing $24 million of expenditure reductions that staff say will not affect direct service delivery; and targeted additions totaling $34 million, primarily for the Phoenix Fire Department and the Office of Homeless Solutions. Williamson said the model assumes the council would set aside a modeled $17 million one‑time surplus next year to help smooth future years.

The budget presentation included proposed additions to the Fire Department that staff say would be funded in part by the proposed tax increase: converting 32 grant‑funded SAFER positions to ongoing General Fund positions, partial year costs to begin staffing a new GEO bond fire station (Station 15), and $25 million in net new ongoing resources to hire roughly 134 sworn personnel and 19 civilian positions that the department expects would reduce localized critical emergency medical service times. Phoenix Fire Chief provided localized response estimates: for areas planned for new stations, he said local critical EMS response averages of about seven to nine minutes could fall to roughly four minutes 43 seconds with the new stations and personnel; the citywide localized projection in staff materials was a reduction from about 8 minutes 30 seconds to 4 minutes 25 seconds.

Staff and council members repeatedly attributed the need for new revenue to recent state actions, including legislation described in the presentation as "Senate Bill 1131" (eliminating residential rental sales tax effective January) and a 2021 law described as "Senate Bill 1828" (moving to a flat individual income tax rate). Williamson said those changes and other possible future state or federal actions create uncertainty and the structural shortfall shown in staff forecasts, which showed a multi‑year shortfall of roughly $125 million without additional action.

Council members asked clarifying questions about the model, tradeoffs in the $24 million of targeted reductions, and where additional federal funding risks might affect city programs. Williamson said the city receives more than $3.7 billion annually in federal funds across departments and that programmatic consequences would depend on which federal dollars might be reduced.

City manager Jeff Barton and budget staff outlined next steps: the City Manager's proposed budget will be presented May 6 (information only), council budget decisions will be on May 20, tentative adoption in June with final adoption June 18 and property tax levy adoption on July 2.

"Resources now estimated at 2,040,000,000, expenditures estimated at 2,079,000,000, reflecting a revised deficit for next fiscal year of 39,000,000," Amber Williamson said during the presentation. Phoenix Fire Department officials said targeted new stations and personnel would materially reduce localized EMS response times in the areas receiving new resources.

If approved by the council, staff said the TPT increase and the other strategies would provide a path to balance the FY2025‑26 general fund while preserving city services and funding initial steps to reduce emergency response times.

The council did not make a final budget adoption at the March 18 meeting; councilmembers and staff emphasized this is an early step in a multimonth adoption process and that public hearings will be held prior to final decisions.

Ending: Staff materials, the full preliminary CIP and supporting schedules are available at phoenix.gov/budget and phoenix.gov/bond. The council will consider the City Manager's proposed budget May 6 and take budget decisions on May 20 before legal adoption steps in June and the property tax levy adoption in July.