Phoenix officials outline budget shortfall, propose 0.5-point sales tax increase and excise-bond plan to shore up fire and homelessness funding

City budget staff told the Phoenix City Council on Feb. 25 that state tax changes and slowing local sales-tax growth leave the city facing a structural gap that requires either revenue increases or cuts to services.

Budget and Research Director Amber (listed in meeting materials as Amber) said the city’s updated preliminary general-fund status for fiscal 2025–26 shows an estimated resources figure of $2,038,000,000 and estimated expenditures of $2,074,000,000, producing a $36,000,000 deficit under the baseline forecast. Amber said those estimates reflect the earlier reduction in state shared income-tax revenue after the switch to a flat rate and the elimination of the residential-rental sales tax.

The deficit matters because Phoenix is required to adopt a balanced budget each year. Amber and City Manager Jeff Barton presented a two-part strategy the administration recommends: (1) a possible 0.5 percentage-point increase in the city’s transaction privilege and use tax from the current 2.3% to 2.8%, effective July 1 if approved; and (2) issuing excise‑tax bond proceeds to fund capital and apparatus for the fire department. The administration and council repeatedly emphasized that, absent new revenue, the city…