Attachment E - GF Revenue Estimates.pdf
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BUDGET AND RESEARCH DEPARTMENT REPORT
B.R.D. NUMBER
2025-05
SUBJECT
General Fund Revenue Estimates
DATE ISSUED
March 18, 2025
This report provides General Fund (GF) revenue estimates to explain recommended revenue
projections. The City is committed to providing a transparent and open budget process. Providing this
information enhances the review and understanding of how revenue projections are developed to
better facilitate discussions during the annual budget development process.
Careful examination of revenue estimates is required to ensure projections are as accurate as
possible to maintain fiscal stability and long-term budget management. Predicting future revenue
growth is challenging and requires consistent and diligent analysis based on sound forecasting
principles and methods. Revenues are monitored closely, and an updated revenue report is prepared
and distributed to the City Manager’s Office, the City Council, and the community for review monthly.
GF revenues are comprised of several categories, all of which are unique and require separate
analysis. The primary revenue categories include local taxes and related fees, primary property taxes,
state shared sales, income and vehicle license taxes, and user fees and non-tax revenues.
Included in this report is an explanation of how GF revenue is projected, the sources relied upon to
assist in developing estimates, economic assumptions and the methods used to analyze revenues.
Also included are historical revenue actuals and growth rates, the recommended revenue estimates
for 2024-25 and 2025-26, and an explanation of the influencing factors used by staff in analyzing
each major revenue category. Revenue estimates for Local Taxes assume City Council approval of a
proposed Transaction Privilege Tax and Use Tax rate increase from 2.3% to 2.8% effective July 1,
2025. The City Council is scheduled to vote on the proposed tax rate increase on March 18, 2025.
The table below summarizes the 2024-25 and 2025-26 estimated GF revenues and the primary
reason for the variance:
GF Revenue Category
(millions)
2024-25
Estimate
2025-26
Estimate
Amount
Change
Percent
Change
Primary Reason for Difference
Local Taxes
$718.4
$840.9
$122.5
17.1% Assume moderate growth and a
0.5% TPT rate increase.
Primary Property Tax
215.4
222.7
7.3
3.4% Increase in assessed property
valuation.
State Shared Sales
Tax
252.5
262.7
10.2
4.0% Moderate growth is expected.
State Shared Income
Tax
351.0
328.3
(22.7)
-6.5%
Based on collections received two
years prior. Includes impact of
Senate Bill 1828.
State Shared Vehicle
License Tax
88.0
90.9
2.9
3.3% Moderate growth is expected.
User Fees & Non-
Taxes
194.0
191.3
(2.7)
-1.4% Projected decline in interest
earnings.
Total
$1,819.3
$1,936.8
$117.5
6.5%
ATTACHMENT E
Revenue Projections & Trusted Sources
Projecting revenues involves complex analysis and continuous monitoring to identify variances and
recommend adjustments so that expenditures do not exceed available resources and a balanced
budget can be maintained. As part of the overall forecasting process, assumptions about the
direction and strength of the national, state, and local economy are considered along with indicators
such as population, job growth and personal income. Information on program and service activity
levels, rates, and fees that influence certain revenues are evaluated and proposed legislation is
monitored to determine potential impacts to revenue categories such as sales taxes, state shared
revenues, emergency transportation service revenues and property taxes.
For example, the State enacted Senate Bill (SB) 1131, which prohibits municipalities from taxing
residential rental property starting Jan. 1, 2025. The estimated five-month impact to the GF for
2024-25 is approximately $(19) million and the ongoing annual impact beginning in 2025-26 is over
$(47) million. Additionally, SB 1828 reduces individual income tax rates beginning in tax year 2022
to the current flat tax rate of 2.5%. The City receives state-shared income taxes based on actual
collections from two years prior. Compared to FY 2023-24 collections, state-shared income tax
revenue will decrease by $(85) million in FY 2024-25, followed by an additional reduction of $(23)
million in FY 2025-26. To address the revenue decline resulting from the State’s actions and to
support both existing and future costs to deliver programs and services to the community, the City
proposes increasing the Transaction Privilege Tax (TPT) and Use Tax rate from 2.3% to 2.8%,
effective July 1, 2025, as reflected in the revenue forecast. The City Council is scheduled to vote on
the proposed tax rate increase on March 18, 2025.
In addition, information from City departments on user fees and non-tax revenue is requested and
analyzed each year as part of the technical budget review process. Finally, trusted economic and
financial sources are relied on to provide certain revenue projections and insight into the overall
direction and strength of the economy and include experts from the State’s Finance Advisory
Committee (FAC), Joint Legislative Budget Committee (JLBC), Arizona State University, University
of Arizona (UofA) Economic and Business Research Center (EBRC), Arizona Department of
Revenue, National Blue Chip, Western Blue Chip, and the U.S. Bureau of Labor Statistics and
Bureau of Economic Analysis.
The City is also a member of the Forecasting Project through the EBRC at the UofA. This project is
a community-sponsored research program providing project members with economic forecasts for
Arizona and the Phoenix-Mesa metro area. Budget & Research (B&R) staff attend quarterly
meetings, participate in discussions with other local government and private enterprise members,
and receive quarterly economic reports. In the fall of 2014, Budget and Research consulted with the
UofA’s Eller College of Management, EBRC to enhance the City’s sales tax revenue forecasting
process. Dr. George Hammond, EBRC Director, and Dr. Alberta Charney, Senior Research
Economist, spent several months working with City staff to develop an enhanced econometric sales
tax forecasting model for all categories of city and state sales taxes. In the summer of 2017, staff
worked with EBRC to update the tax forecasting model. In March 2021, the EBRC revised the City’s
model again by including online sales tax. The EBRC leads the State of Arizona Forecasting
Project, which provides in-depth economic forecast analysis and databases on a subscription basis
to businesses, organizations, and government via membership. The additional consulting with Dr.
Hammond has provided the City with solid, independent economic and statistical expertise used to
develop a statistically valid forecasting model specifically for the City of Phoenix. The projected
growth rates in each category of sales tax for the 2025-26 estimate and the out years of the forecast
are based on projections developed with the enhanced econometric forecasting model.
Economic Assumptions
Several of the primary revenue categories are influenced by the economy and the sources
mentioned above provide valuable information about the expected growth of the economy. These
sources are used in developing projected revenue growth rates. B&R staff continuously monitor
economic variables and what these experts are predicting when developing revenue estimations.
The U.S. economy experienced the most robust recovery from the COVID-19 pandemic compared
to other major developed economies, demonstrating resilience and potential for continued growth.
Real Gross Domestic Product (GDP), a common economic measure, grew 2.8% in 2024, compared
with an increase of 2.9% in 2023. According to the U.S. Bureau of Economic Analysis (January
2025), the 2024 growth was attributed to increases in consumer spending, nonresidential fixed
investment, state and local government spending, and exports. However, the Blue Chip Economic
Indicators (BCEI) consensus projects that real GDP will grow at a slower pace, with an estimated
growth of 2.2% in 2025 and 2.0% in 2026. Uncertainties and market volatility are still expected to
persist throughout the year, driven by factors such as geopolitical conflicts, policy shifts under the
new administration, high consumer debt levels, low housing affordability, labor market challenges,
high interest rates, global supply chain disruptions, and inflationary pressures.
The U.S. economic growth established a platform for continued solid gains in Arizona in 2024.
Inflation is currently below the national rate, and job growth is occurring at a faster pace than in the
US (Arizona Governor’s Executive Budget, January 2025). As of December 2024, Arizona’s
Consumer Price Index (CPI-U) was 1.9%, which is lower than the U.S. City Average of 2.9%.
Furthermore, Arizona’s job growth reached 2.1% for the twelve months ending in December,
outpacing the national average of 1.6%. Additionally, the Phoenix MSA average hourly earnings
within the private sector have increased by 6.5%, exceeding the Phoenix MSA CPI-U of 2.2% in
2024. The Arizona economy experienced a solid year in 2024, but faced several challenges such as
slowing growth, housing affordability issues, and uncertainty regarding new government policies.
Arizona taxable retail sales growth (including remote sellers) has decelerated in recent months.
Year-to-date (YTD) statewide taxable retail plus remote sales tax increased by only 2.3% in
December 2024, a decline from 2.8% in December 2023 and 6.4% in December 2022. YTD sales
tax collections for Prime Contracting grew by only 2.8% in December 2024, compared to 17.3% in
December 2023 and 21.6% in December 2022. According to the JLBC, this is the lowest growth rate
for the comparable period since December 2021 when the construction industry in Arizona was
adversely affected by the pandemic (JLBC, January 2025). Furthermore, Arizona’s job growth has
been decelerating. As of December 2024, the year-over-year job growth rate for non-farm
employment has slowed to 1.7%, a decline from 2.4% in 2023 and 3.4% in 2022 (U.S. Bureau of
Labor Statistics, January 2025). Following the COVID-19 pandemic, Arizona has experienced a
surge in home and rent prices; housing affordability has remained a primary challenge for the state.
The number of building permits issued in Arizona has continued to drop. Statewide new housing
units for single-family and multi-family homes decreased by 38.8% in December 2024 compared to
December 2023 (EBRC Benchmark).
Revenue Forecasting Methods
Several forecasting methods and practices are used to estimate City revenues and vary depending
on the type of revenue being analyzed. Evaluating historical growth patterns and current actuals is
an important component to analysis and provide insight into the direction of the various revenue
categories and the growth needed to achieve estimated revenues. Information is also collected from
the economic sources mentioned earlier to ensure the current and subsequent year’s estimates are
reasonable and in-line with what these experts are predicting. The State FAC provides valuable
information from a panel of respected economists and financial professionals. Included in their
materials are projections of state sales tax and income tax collections. These projections are
considered when developing city sales tax, and state shared sales and income tax revenues for both
the current and subsequent fiscal years. Additionally, information is collected from City departments
during the annual technical review process to analyze the user fee and non-tax revenue category.
The department’s knowledge of the revenues generated by various City programs and services is
essential to developing accurate projections. Staff also considers one-time revenues, adjustments,
and contractual agreements impacting growth when developing estimates.
In conjunction with considering historical growth, current trends, and information from trusted
sources and departments, B&R staff uses several forecasting methods when preparing the
estimates. The most common methods of revenue estimation used are averages of actual revenue
experience by varying periods, annualization of year-to-date actuals, and most often a percentage of
prior year method. This last method involves analyzing the amount of revenue collected at a point in
time during prior fiscal years, for example, the 7-month actuals represented a certain percentage of
the total collections for the entire fiscal year and then applying it to current year-to-date actuals. This
method accounts for the seasonal nature of many City revenues and is often a more effective
method than using an average or annualizing approach. Additionally, the growth rate needed to
reach the budgeted or estimated revenue is considered. If the percentage growth needed for the
remaining months of the fiscal year is substantially higher or lower than the current growth rate,
adjustments are made to arrive at a new estimated revenue amount for the fiscal year.
Once the current fiscal year estimate is developed, assumed growth rates are then applied to this
amount to arrive at a projected revenue amount for the following fiscal year. These assumed growth
rates take into account historical and recent trends in revenue data, one-time revenue adjustments,
and information from City departments and our trusted sources to ensure projections are not overly
conservative or aggressive.
Finally, as part of the annual budget development process each year, revenue estimates are
presented to the City Manager’s Office, the City Council and the community as part of the GF Multi-
Year Forecast, the proposed Trial Budget and City Manager’s Budget recommended for
consideration and approval prior to final budget adoption in June.
General Fund Revenue
To assist in explaining the basis for how GF revenue is estimated for each of the major categories,
historical revenue growth and estimated revenues for the 2024-25 and 2025-26 fiscal years are
provided graphically, along with a description of the revenue category and the methodology used
to develop recommended revenue estimates beginning with total GF revenue.
Total General Fund Revenue
* Projections for 2024-25 and 2025-26 assume no fee increases, changes to state shared revenue formulas or legislative
changes that have recently been proposed or discussed during the current legislative session. The 2025-26 estimate includes
a potential TPT and Use Tax rate increase of 0.5%, effective on July 1, 2025, if approved by City Council on March 18, 2025.
As mentioned, GF revenue consists of local taxes and related fees, primary property taxes, state
shared sales, income and vehicle license taxes, user fees and non-tax revenues. Estimating
revenues for each category is conducted separately to predict the revenues for the current and
following fiscal year more accurately. Each category is unique with respect to the variables that
comprise the revenue and influence growth. Variables that impact revenue growth include
economic factors such as inflation, consumer sentiment, discretionary income, population,
unemployment, job growth and construction activity. Other influencing factors may include
legislative action, City Council policy directives, legal restrictions and mandates, state statutory
formulas, program enhancements or reductions, and changes in rates and fees. For these
reasons, evaluating each major category separately is preferred and generates more accurate
revenue projections.
$1,075
$1,106
$1,173
$1,221
$1,259
$1,379
$1,496
$1,693
$1,905
$1,819
$1,937
2%
3%
6%
4%
3%
10%
8%
13%
13%
-5%
6%
-6 0 %
-5 0 %
-4 0 %
-3 0 %
-2 0 %
-1 0 %
0 %
1 0%
2 0%
2 0 .0
4 0 .0
6 0 .0
8 0 .0
1 0 0 .0
1 20 0 .0
1 40 0 .0
1 60 0 .0
1 80 0 .0
2 0 0 .0
Actual & Estimated General Fund Revenue $
% Change
$ Millions
Local Taxes and Related Fees, 43% of Total General Fund Revenue
$437
$441
$453
$490
$501
$559
$650
$697
$730
$718
$841
2%
1%
3%
8%
2%
12%
16%
7%
5%
-2%
17%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
200.0
300.0
400.0
500.0
600.0
700.0
800.0
Actual & Estimated Revenue $
% Change
$ Millions
Local taxes and related fees consist of city sales taxes, privilege license fees and other excise
taxes. The majority of revenue is derived from city sales taxes, which is comprised of 15 general
categories collected based on a percentage of business income accruing in each category. The
table on the following page provides the local sales tax rates by category and the percentage
allocated to each fund. The table reflects a proposed 0.5% increase in the TPT and Use Tax rates,
raising them from 2.3% to 2.8%, effective July 1, 2025, pending City Council approval on March 18,
2025.
Privilege license fees are assessed to recover the costs associated with administering the local tax
system. Other excise taxes include the jail tax and the excise tax collected on water service
accounts, which provide resources to help offset jail costs paid to Maricopa County and other GF
services.
Projections provided by the UofA were used to develop city sales tax estimates. Staff analyzes
historical and recent trends in sales tax data by category, evaluates cumulative growth and uses an
econometric forecasting model constructed by the UofA to develop projections. Estimates provided
by the FAC and JLBC are also considered to ensure projections are reasonable and not overly
aggressive or conservative in nature. Sales tax can be volatile and typically correlates to the local
economy and consumer spending behavior. Increases in sales tax collections are expected when
the local economy expands due to underlying fundamentals such as increases in population,
discretionary income, business expansion, jobs, and real estate growth. The opposite holds true
during times of economic contraction or recession as evidenced in 2008-09 and 2009-10 during the
Great Recession, and most recently during the COVID-19 pandemic. The federal stimulus
assistance provided during the pandemic and more than expected revenue collections from retail
and contracting sales taxes offset the revenue loss in the hospitality and leisure sales tax
categories which prevented a severe decline in City revenues. Additionally, the recent surge in
inflation has positively impacted the City by drawing in greater tax revenue from higher-priced
taxable goods and a rise in wages. However, significant economic uncertainty and volatility in sales
tax revenue collections in the first seven months of FY 2024-25 require a cautious approach to
forecasting. Staff is closely monitoring revenue collections and may revise revenue estimates as
more information is available. Currently, the growth estimated in 2025-26 of 17.1% assumes a
potential 0.5% increase in the TPT and Use Tax rates, effective July 1, 2025, if approved by City
Council on March 18, 2025. The forecast also accounts for moderate growth and the negative
impact of the elimination of residential rental sales tax. The State recently enacted SB 1131, which
prohibits municipalities from taxing residential rental property starting Jan. 1, 2025. The estimated
five-month impact to the GF for 2024-25 is approximately $(19) million, and the ongoing annual
impact beginning in FY 2025-26 is over $(47) million.
Privilege license fees and other excise tax projections are developed using the existing fee
structures, assumptions about historical trends, averages, recent collection experience and use of
the percent of prior year method to account for seasonal influences in revenue activity. Privilege
license fees are projected to decline by 45.5% in 2025-26. Starting January 1, 2025, income from
residential rentals of 30 days or more is exempted from Transaction Privilege Tax, leading to a
significant decrease in these fees. The growth estimated in 2025-26 for other excise taxes assumes
conservative growth and continuation of current year-to-date experience.
Local Sales Tax Rates by Category
GF
N’hood
Protection
2007
Public
Safety
Expansion
Public
Safety
Enhance.
Parks
&
Pres.
Transp.
2050***
Conv.
Center
Sports
Fac.
Capital
Const.
Total
Advertising
–
–
–
–
–
–
0.5%
–
–
0.5%
Contracting*****
0.9%
0.1%
0.2%
–
0.1%
0.9%
0.6%
–
–
2.8%
Job Printing*****
0.9%
0.1%
0.2%
–
0.1%
0.9%
0.6%
–
–
2.8%
Publishing*****
0.9%
0.1%
0.2%
–
0.1%
0.9%
0.6%
–
–
2.8%
Transportation/Towing*****
0.9%
0.1%
0.2%
–
0.1%
0.9%
0.6%
–
–
2.8%
Restaurants/Bars*****
0.9%
0.1%
0.2%
–
0.1%
0.9%
0.6%
–
–
2.8%
Leases/Rentals/
Personal Property*****
1.5%
0.1%
0.2%
–
0.1%
0.9%
–
–
–
2.8%
Short-Term Motor
Vehicle Rental*****
1.5%
0.1%
0.2%
–
0.1%
0.9%
–
2.0%
–
4.8%
Commercial Rentals*****
1.6%
0.1%
0.2%
–
0.1%
0.9%
–
–
–
2.9%
Lodging Rentals
Under 30 Days*****
1.5%
0.1%
0.2%
–
0.1%
0.9%
2.0%
1.0%
–
5.8%
Lodging Rentals
30 Days and Over******
–
–
–
–
–
–
–
–
–
–
Retail (Level 1 – amounts
= < $13,886 for a single
item) **** & *****
1.5%
0.1%
0.2%
–
0.1%
0.9%
–
–
–
2.8%
Retail (Level 2 – amounts
> $13,886 for a single
item) ****
1.2%
0.1%
0.2%
–
0.1%
0.4%
–
–
–
2.0%
GF
N’hood
Protection
2007
Public
Safety
Expansion
Public
Safety
Enhance.
Parks
&
Pres.
Transp.
2050***
Conv.
Center
Sports
Fac.
Capital
Const.
Total
Amusements*****
1.5%
0.1%
0.2%
–
0.1%
0.9%
–
–
–
2.8%
Utilities
2.7%*
–
–
2.0%**
–
–
–
–
–
4.7%
Telecommunications
2.7%
–
–
–
–
–
–
–
2.0%
4.7%
*The General Fund portion of the utilities category includes the 2.7 percent franchise fee paid by utilities with a franchise agreement.
**The Public Safety Enhancement designated 2.0 percent sales tax applies only to those utilities with a franchise agreement.
***The Transportation 2050 Fund (Proposition 104) was established by the voters effective January 1, 2016 and replaced the Transit
2000 Fund (Proposition 2000) to fund a comprehensive transportation plan with a 35-year sunset date. The Proposition increased
the transaction privilege (sales) tax rates by 0.3% for various business activities.
****Proposition 104 also established a two-tier tax rate structure applicable to retail sales of single items in excess of $10,000, to be
adjusted biennially for inflation. Effective January 1, 2018, the first $10,303 (Level 1) is subject to the 2.3% tax rate, while
transactions over $10,303 (Level 2) are subject to the 2.0% tax rate. The criteria for Level 1 and Level 2 were adjusted on January 1,
2024, and the current threshold is $13,886, which will be adjusted again on January 1, 2026.
*****The tax rates reflect a proposed 0.5% increase, from 2.3% to 2.8%, effective July 1, 2025, pending City Council approval on
March 18, 2025. The rounded tax rates for each fund are provided for demonstration purposes, with the specific percentages used in
the actual allocation.
******SB 1131 prohibits municipalities from taxing residential rental property starting January 1, 2025.
Primary Property Tax, 11% of Total General Fund Revenue
$141
$146
$155
$162
$170
$182
$192
$201
$206
$215
$223
2%
3%
6%
5%
5%
7%
6%
5%
3%
4%
3%
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
50.0
70.0
90.0
110.0
130.0
150.0
170.0
190.0
210.0
230.0
Actual & Estimated Revenue $
% Change
$ Millions
Arizona property tax law provides two separate tax systems. A primary property tax is levied to pay
current operations and maintenance expenses. Therefore, primary property tax revenue is
budgeted and accounted for in the GF (and is illustrated in the above graph). A secondary property
tax levy is restricted to the payment of debt service on voter approved long-term general obligation
debt. Therefore, the secondary property tax revenue is budgeted and accounted for as a special
revenue fund. The primary property tax levy forecast reflected here is based on the net assessed
value stated in the annual “Levy Limit Worksheet” for the City of Phoenix, issued by the Maricopa
County Assessor, multiplied by the projected primary property tax rate. The primary property tax
revenue forecast assumes that 99% of the projected primary property tax levy is actually collected.
The annual amount of the primary property tax levy is limited by the Arizona Constitution to a two
percent increase over the prior year levy limit plus an estimated levy for previously unassessed
property (primarily new construction). Provisions in Chapter XVIII of the City Charter limit the City’s
primary property tax rate to $1.00 per $100 of assessed valuation with the exception of costs to
operate library services. The proposed 2025-26 primary property tax rate, not including the portion
of the rate allocated to cover the Library Department operating costs, is $1.00 per $100 of assessed
valuation. The proposed primary property tax rate for 2025-26 of $1.2658 is equal to the 2024-25
primary property tax rate and is lower than the rate allowable under the state constitutional 2% levy
limit of $1.2755, which limits the Primary Property Tax to an amount 2% greater than the prior-year
levy on previously taxed properties. Although the primary property tax rate remains constant, the
primary property tax revenue estimate increases for 2025-26 to $222.7M, which is $7.3M or 3.4%
more than the 2024-25 revenue estimate of $215.4M due to increased taxable net assessed
valuations (property values) and new construction.
State Shared Sales Tax, 14% of Total General Fund Revenue
$138
$144
$156
$165
$172
$201
$230
$242
$250
$253
$263
4%
5%
8%
6%
4%
17%
14%
5%
3%
1%
4%
-7 0 %
-6 0 %
-5 0 %
-4 0 %
-3 0 %
-2 0 %
-1 0 %
0 %
1 0%
2 0%
5 0. 0
1 0 .0
1 50 .0
2 0 .0
2 50 .0
Actual & Estimated Revenue $
% Change
$ Millions
State sales tax revenues received by the City are governed by Arizona State Statute §42-5029.
State sales tax revenues are split between a “distribution base”, of which Phoenix receives a share,
and a “combined non-shared” category, which is allocated entirely to the state. With the exception
of some tax categories, the distribution base consists of either 20, 32, 40, or 50 percent of
collections depending on the tax category. State statute §42-5029 stipulates of the monies
designated in the distribution base the Arizona Department of Revenue shall pay 25 percent to
incorporated cities on the basis of relative population percentages. The population share changes
annually based on Census Bureau Population Estimates. The 2025-26 City of Phoenix population
share is estimated at 27.71 percent and is based on the 2023 Census Bureau Population Estimate.
State sales tax is estimated similar to how city sales tax is forecasted. Staff analyzes historical and
recent trends in sales tax data by category and evaluates cumulative growth when developing
revised estimates. Projections provided by the UofA EBRC, using an econometric sales tax model,
were used to develop 2025-26 estimates; and information from the FAC and JLBC were considered
to ensure current fiscal year estimates are reasonable and in-line with what these experts are
projecting.
State Shared Income Tax, 17% of Total General Fund Revenue
$174
$191
$200
$197
$215
$240
$213
$308
$436
$351
$328
-1%
10%
5%
-2%
9%
12%
-11%
44%
41%
-19%
-6%
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
500.0
Actual & Estimated Revenue $
% Change
$ Millions
State shared income tax revenue, also known as the Urban Revenue Sharing (URS) Fund, was
established by voter initiative in 1972 and is governed by Arizona Revised Statute §43-206. The
statute stipulates that 15 percent of the net proceeds of state individual and corporate income tax
collected two years preceding the current fiscal year be distributed to incorporated cities and towns.
Laws 2021, Chapter 412 (Tax Omnibus) increased the Urban Revenue Sharing distribution from
15% to 18% starting in 2023-24. Individual cities receive their portion based on the cities’ share of
the state population. The 2025-26 City of Phoenix population share is estimated at 27.68 percent
and is based on the 2023 Census Bureau Population Estimate. This rate will change annually
based on Census Bureau Population Estimates. As a result of the initiative, Arizona Revised
Statute §43-201 stipulates the area of income taxation is preempted by the state and a county, city,
town, or other political subdivision shall not levy income tax as long as the Urban Revenue Sharing
Fund is maintained as provided in state statute §43-206.
Since state shared income tax revenue is based on actual collections from two years preceding the
current fiscal year, the 2024-25 and 2025-26 projected revenue is known and is based on actual
collections received in 2022-23 and 2023-24, respectively. The negative growth of (19.4) % in FY
2024-25 and (6.5) % in FY 2025-26 are primarily due to significantly lower state shared income tax
collections caused by the State’s actions to lower the individual income tax rate to the current “flat
tax”. Senate Bill 1828 reduces individual income tax rates beginning in tax year 2022 to the current
flat tax rate of 2.5%.
State Shared Vehicle License Tax, 5% of Total General Fund Revenue
$60
$62
$67
$70
$71
$80
$79
$81
$84
$88
$91
8%
3%
8%
5%
0%
13%
-1%
2%
4%
5%
3%
-80%
-60%
-40%
-20%
0%
20%
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
Actual & Estimated Revenue $
% Change
$ Millions
State shared vehicle license tax has been distributed to cities and towns since 1941. The tax is
levied per $100 of a vehicle’s assessed value. For the first 12 months of the vehicle’s life, the
assessed value is 60% of the manufacturer’s base retail price. For each subsequent year, the
assessed value is 16.25% less than the previous year. The rate per $100 of assessed value is
$2.80 for new vehicles and $2.89 for renewals. The Arizona Department of Transportation (ADOT)
collects and distributes the tax according to Arizona Revised Statute §28-5808. The distribution to
individual cities is based on their relative population within the county. The 2025-26 City of Phoenix
population share is estimated at 39.19 percent and is based on the 2023 Census Bureau Population
Estimate. This rate will change annually based on Census Bureau Population Estimates.
Vehicle License Tax (VLT) revenues are often correlated to the overall strength of the economy.
Similar to sales tax revenues, this revenue category tends to grow when the economy is expanding,
as illustrated in the graph above. Revenues are estimated by evaluating historical growth patterns,
year-to-date cumulative growth and applying the percent of prior year method to year-to-date
actuals, which accounts for the seasonality in collections. Staff also consider projections
provided by ADOT, which are published annually for this revenue source, and any available recent
economic information pertaining to projections on the local economy and vehicle sales when
formulating recommended current and subsequent year estimates. The projected growth rate for
2025-26 is expected to be 3.3%, assuming a moderate growth rate based on the ADOT forecast in
September 2024.
User Fees and Non-Tax Revenues, 10% of Total General Fund Revenue
$125
$122
$142
$137
$131
$117
$132
$164
$200
$194
$191
0%
-2%
16%
-4%
-5%
-11%
13%
24%
22%
-3%
-1%
-110%
-90%
-70%
-50%
-30%
-10%
10%
30%
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Actual & Estimated Revenue $
% Change
$ Millions
User Fees and Non-Tax Revenues include collections from licenses and permits, fines and
forfeitures, cable television fees, user fees from several City departments designed to recover the
costs of providing specific City services including Parks and Recreation, Library, Planning, Police,
Fire, and Streets; other service charges including interest income, parking meter revenue, in lieu
property taxes, sales of surplus property, various rental income, parking garage revenues and
concessions; miscellaneous service charges in Finance, Housing, Human Services and
Neighborhood Services.
B&R staff relies on departments to provide essential information concerning activity levels, fee
increases or decreases and program changes which impact the variety of revenue sources in this
category. Technical revenue reviews are conducted twice each fiscal year as part of the annual
budget development process. Departments are asked to provide revenue estimates and reasons for
changes from prior year actuals. Staff conducts a line-item analysis of all revenues and uses
various methods including annualization and percentage of prior year, as well as consideration of
one-time and contractual revenues, program enhancements or reductions and other adjustments
when developing estimates.
The projected negative growth rate of (1.4)% in 2025-26 was attributed to a decline in interest
earnings, which offset the moderate growth of emergency transportation services. Some non-tax
revenues, such as cable communications and police personal service billings, are expected to
decrease in 2025-26 due to a decline in collection trends and one-time revenue collections in 2024-
25.
In addition to the technical reviews conducted twice each fiscal year, B&R staff monitors revenues
monthly to determine if adjustments to projections are needed. The proposed estimates are then
reviewed by B&R management and the City Manager, and finally incorporated into the GF proposed
revenue projections for consideration by the City Council and the community.
This report is for informational purposes only and is intended to provide the City Council and the
community with explanations on how GF revenues are analyzed and developed to better facilitate
discussions during the annual budget development process.
Yung Pham
Principal Budget and Research Analyst