Oro Valley council adopts 2.5% use tax; telecom and commercial rental tax proposals fail
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Summary
Faced with budget shortfalls and rising costs, council approved a 2.5% local use tax (effective 7/1/2026) by 4‑3. Two related tax proposals — a 2.5% telecommunications tax and a phased commercial rental tax — failed on close council votes (each recorded as failing 4‑3).
On Jan. 14 the Oro Valley Town Council voted 4‑3 to adopt a local use tax of 2.5% (Ordinance O26‑02), effective July 1, 2026, while declining two companion proposals: a 2.5% telecommunications tax (O26‑03) and a new commercial rental tax (O26‑04). The telecom and commercial rental measures failed on council roll calls recorded as 4‑3 opposing each.
Chief Financial Officer Mr. Gephart framed the tax package as a response to a structural revenue challenge: the town has seen construction‑related and transaction privilege tax collections flatten and staff projects a roughly $2.4 million shortfall to budget in the current fiscal year. Gephart said the town also faces sharply higher pavement‑preservation costs and potential state revenue pressures and that the proposed taxes would diversify revenue sources not tied to growth.
Public comment included opposition from small‑business owners and the Oro Valley Chamber of Commerce, which argued new taxes would further burden local businesses and could be passed through to consumers. Chamber leader Kristen Sharp said the town should prioritize creating an environment that attracts private investment rather than imposing new taxes. Jeff Laird of Wow Wow Lemonade said his small business has already faced cost pressures and urged the council to focus on growing consumer spending rather than adding taxes.
Council supporters said adoption of the use tax creates parity with out‑of‑state purchases and helps protect local retailers; they noted the use tax is common among peer Arizona cities and estimated it would generate between $375,000 and $600,000 annually. The proposed telecommunications tax was estimated to generate roughly $130,000–$280,000 and the commercial rental tax estimates ranged roughly from $425,000 to $1.1 million annually; the commercial rental tax language would have been phased (1% effective 07/01/2026 and 1.5% effective 07/01/2028) and dedicated to capital needs.
Roll‑call votes in the meeting record show the use tax passed 4‑3, while the telecommunications and commercial rental tax proposals failed 4‑3. Council directed staff to continue public engagement and to follow the statutory process for implementing the use tax.