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Tucson staff report $29M FY2027 operating gap; council approves 3.5% annual water rate plan
Summary
City staff reported a preliminary FY2027 operating shortfall of roughly $28.9 million and outlined long‑range forecasts and community budget engagement. Council approved staff's water rate framework (3.5% annual revenue increases for FY27–FY30) at the study session after discussion of alternatives and stakeholder feedback.
City finance staff told the March 17 study session the city’s preliminary operating gap for fiscal year 2027 stands at about $28.9 million and that long‑range projections through FY2030 remain a central budget risk.
“We continue to have a deficit…that projected operating deficit for fiscal 27 is currently estimated at 28.9 approximately $29 million negative operating,” Assistant City Manager and CFO Anna Rosenberry said during the council’s study session.
Rosenberry told the council staff has narrowed the gap from earlier projections and will continue refining a balanced city manager recommended budget that will be released in the coming weeks. She emphasized revenue uncertainties—federal funding shifts and economic volatility—and the need for fiscal flexibility in the manager’s recommended proposal.
Water rates and multi‑year rate frameworks
As part of a package of notices of intent to revise enterprise rates, Tucson Water presented two options: the staff recommendation of a 4‑year framework with 3.5% annual revenue increases for FY27–FY30, or an alternative from the Citizens Water Advisory Committee (SEWAC) that would keep the previously adopted FY27 increase at 5.5% then apply 3.5% in FY28–FY30.
The council voted to adopt the staff recommendation and publish a notice of intent to pursue the 3.5% annual increases across the four‑year plan. The motion passed by voice vote with one councilor recorded as opposed (6–1 tally).
Other rate and fee proposals
Staff also presented proposed revisions for multiple departments: - Transportation & Mobility proposed restructuring right‑of‑way fees, adding a pavement‑degradation fee and a scaled lane‑closure (loss‑of‑use) fee to recover inspection and congestion costs and incent off‑peak work. - Planning & Development Services proposed a general 5% increase on many non‑valuation permits and targeted raises for categories below cost‑of‑service plus new site‑review fees tied to corridor tools. - Environmental Services proposed modest residential adjustments, a low‑income credit increase and a new $3/month citywide “clean city” fee to fund graffiti abatement, illegal dumping and homeless camp cleanup crews. Environmental Services Director Carlos Deator said the $3 monthly charge would fund three crews and related operations.
Next steps
Notices of intent were scheduled for publication and stakeholder engagement through March and April, with public hearings and formal adoption votes expected in May and an effective date for many changes in July if adopted.
Why it matters: The city faces a near‑term gap that will influence staffing, services and investments. Rate and fee changes for enterprise funds and permitting affect residents and businesses differently; council and staff emphasized outreach and transparency as budget and rate materials move toward formal hearings.
