Attachment B - FAQs Expenditure Limit.pdf

ATTACHMENT B 
Expenditure Limit 
Frequently Asked Questions 
 
 
1. 
What is the State expenditure limit? 
 
It is a State Constitutional limit approved by voters in 1980 which restricts annual 
spending limits of cities and towns.  The limit applies to all local revenues. 
 
 
• Limits spending to 1979-80 levels adjusted for: 
 
o Population; including annexations 
o Inflation; gross domestic product and inflation price deflator 
o Population and inflation factors are provided by the State 
 
• Exempts certain expenditures: 
o Federal funds 
o Bond proceeds 
o Debt service 
o Arizona Highway User Revenue (AHUR) 
o Local Transportation Assistance (LTA)  
o Other jurisdictions’ contributions (e.g. the Sub-Regional Operating Group 
for the 91st Avenue wastewater treatment plant) 
 
2. 
What happens if we exceed the spending limitation? 
 
The State will withhold state-shared income tax revenues in a formula-based amount 
set by statute. For Phoenix, this could result in the General Fund losing about $145 
million per year which would be redistributed to all other cities and towns in Arizona. 
 
3. 
What options do cities have to change the limits? 
 
There are four methods for obtaining approval to change the limits. 
 
Alternative Expenditure Limitation (Home Rule Option) 
 
• Only in effect for four years, then must be reapproved by voters. 
• Any and all expenditures can be exempted from the limit. 
• Must be voted on in the year preceding the first fiscal year to which the 
alternative expenditure limit will apply. 
• Can only be voted on at a regularly scheduled election of the local governing 
board (city council). 
• If the voters do not approve the alternative expenditure limitation, the city must 
wait two years before putting it on the ballot again. 
 
Permanent Base Adjustment 
 
• Permanently increases the base from which future spending limits are 
calculated.

•
Does not provide for any increase in exemptions other than those
constitutionally allowed.
•
Can only be voted on at a regularly scheduled election of the local governing
board (city council).
One-Time Override 
•
Applies in the following circumstances:
o
In the event of a natural or man-made disaster and approval by council –
may exceed limit for expenditures directly necessitated by the disaster.
o
Upon affirmative vote of two-thirds of the council and approval by a
majority of voters – may exceed limit by the specific amount approved.
•
Can be voted on at either a regular or special election.
•
Only good for the following fiscal year.
Capital Accumulation Exclusion 
•
Authorizes a permanent exclusion of a fixed level of operating funds for pay-as-
you-go capital.  Limited exclusions for Aviation, Water, Wastewater and Streets
were authorized in 1981.
4.
Can Phoenix go to another approach besides the Home Rule Option?
Phoenix could go to a permanent base adjustment.  Concerns identified through prior
citizen discussions include:
•
This approach does not require periodic review by a citizens’ group.
•
A permanent base adjustment may not be truly permanent.  Each year the
expenditure limit will be calculated based on inflation and local population.  At
some point, it is possible that expenditures would again exceed the limit.  All
spending is subject to pressures not addressed by population and inflation
factors such as environmental mandates and regional issues.  This is especially
true of Enterprise Departments, particularly the airport.  Additionally, the ability
to improve services in accordance with regional economic conditions and
residents’ wishes would be limited.
•
Phoenix’ previous attempts at permanent base adjustments have all failed.
Permanent base adjustments for replacement of Federal Transit Assistance
and Federal Revenue Sharing funds were defeated in 1985.  A permanent base
adjustment for transit expenditures was defeated in 1997.
Phoenix voters have approved local Home Rule Options ten times; 1981, 1985, 1991, 
1995, 1999, 2003, 2007, 2011, 2015 and 2020.  The first Home Rule Option excluded 
Aviation, Water, Wastewater and Civic Plaza operations.  The next two Home Rule 
Options excluded Aviation, Water, Wastewater and Refuse funds.  The 1995 Home 
Rule Option excluded Aviation, Water and Wastewater funds.  In 1999, 2003, 2007, 
2011, 2015 and 2020 the Home Rule Option was set at the adopted budget, which 
follows a thorough community-based process. Several other cities in the State use a 
similar Home Rule Option. 
A history of Home Rule Option and Permanent Base Adjustment Initiatives is included 
in Attachment C.

In 1999, for the first time we saw the impact of the expenditure limit on funds other 
than Aviation, Water, Wastewater and Solid Waste (formerly the Refuse fund).  These 
impacts continue today and have two major causes: 
 
• The use of a national inflation indicator as a measure of economic growth 
prohibited us from responding to what was, until the 2007 recession, a robust 
Phoenix economy. 
• New funding such as the voter-approved Transit 2050, Public Safety 
Expansion and Parks and Preserves taxes. 
 
5. 
When does our current authorization expire? 
 
Our authorization for an alternative expenditure limit expires June 30, 2025.   
 
To implement a new Home Rule covering July 1, 2025 through June 30, 2029, the 
option must be approved by voters on the November 2024 ballot.   
 
6. 
What local cities and towns have approved alternatives to the expenditure 
limitation? 
 
The list of cities and towns that have approved alternatives/exemptions to the state 
expenditure limitation is attached and is the most recent information available from the 
League of Arizona Cities and Towns (Feb. 2023).

FINANCE
Rev (02/2023)
NAME
Type of Alternative Expenditure 
Limit
Year
Effective
Next Home
Rule Election
APACHE JUNCTION
Permanent Base Adjustment
2019-2020
AVONDALE
Home Rule
2021-2022
Fall 2024
BENSON
Home Rule
2021-2022
Fall 2024
BISBEE
Home Rule
2019-2022
Fall 2022
BUCKEYE
Permanent Base Adjustment
2015-2016
BULLHEAD CITY
None
CAMP VERDE
Permanent Base Adjustment
2021-2022
CAREFREE
Permanent Base Adjustment
1999-2000
CASA GRANDE
Permanent Base Adjustment
2009-2010
CAVE CREEK
Home Rule
2021-2022
Fall 2024
CHANDLER
Home Rule
2019-2020
Fall 2022
CHINO VALLEY
Home Rule
2021-2022
Fall 2024
CLARKDALE
Permanent Base Adjustment
2019-2020
CLIFTON
Home Rule
2019-2020
Fall 2022
COLORADO CITY
Permanent Base Adjustment
2002-2003
COOLIDGE
Home Rule
2019-2020
Fall 2022
COTTONWOOD
Permanent Base Adjustment
2013-2014
DEWEY-HUMBOLDT
None
DOUGLAS
Permanent Base Adjustment
2008-2009
DUNCAN
Home Rule
2021-2022
Fall 2024
EAGAR
Home Rule
2019-2020
Fall 2022
EL MIRAGE
Permanent Base Adjustment
2015-2016
ELOY
Permanent Base Adjustment
2021-2022
FLAGSTAFF
Permanent Base Adjustment
2021-2022
FLORENCE
Permanent Base Adjustment
2019-2020
FOUNTAIN HILLS
Permanent Base Adjustment
2006-2007
FREDONIA
Home Rule
2019-2020
Fall 2022
GILA BEND
Home Rule
2019-2020
Fall 2022
GILBERT
Permanent Base Adjustment
1997-1998
GLENDALE
Permanent Base Adjustment
2000-2001
GLOBE
Home Rule
2021-2022
Fall 2024
GOODYEAR
Permanent Base Adjustment
2003-2004
GUADALUPE
Home Rule
2021-2022
Fall 2024
HAYDEN
Permanent Base Adjustment
2019-2020
HOLBROOK
Home Rule
2019-2020
Spring 2024
HUACHUCA CITY
Home Rule
2021-2022
Fall 2024
JEROME
Home Rule
2021-2022
Fall 2024
KEARNY
Permanent Base Adjustment
Home Rule
1982-1983
2019-2020
Fall 2022
KINGMAN
Permanent Base Adjustment
2021-2022
LAKE HAVASU CITY
Permanent Base Adjustment
2019-2020
LITCHFIELD PARK
Permanent Base Adjustment
2005-2006
MAMMOTH
Home Rule
2021-2022
Fall 2024
MARANA
Home Rule
2021-2022
Fall 2024
MARICOPA
Permanent Base Adjustment
2005-2006
MESA
Home Rule
2019-2020
Fall 2022
MIAMI
Home Rule
2021-2022
Fall 2024
NOGALES
Home Rule
2019-2020
Fall 2022
ORO VALLEY
Permanent Base Adjustment
2019-2020
PAGE
Permanent Base Adjustment
2005-2006
PARADISE VALLEY
Permanent Base Adjustment
2006-2007
PARKER
Home Rule
2021-2022
Fall 2024
PATAGONIA
Home Rule
2019-2020
Fall 2022
PAYSON
Home Rule
2019-2020
Fall 2022
PEORIA
Permanent Base Adjustment
2003-2004
PHOENIX
Home Rule
2021-2022
Fall 2024
PIMA
Permanent Base Adjustment
2017-2018
PINETOP-LAKESIDE
Home Rule
2019-2020
Fall 2022
PRESCOTT
Home Rule
2022-2023
Fall 2025
PRESCOTT VALLEY
Home Rule
2021-2022
Fall 2024
QUARTZSITE
None
QUEEN CREEK
Home Rule
2019-2020
Fall 2022
SAFFORD
Permanent Base Adjustment
2008-2009
SAHUARITA
None
SAN LUIS
None
SCOTTSDALE
Permanent Base Adjustment
2006-2007
SEDONA
Home Rule
2019-2020
Fall 2022
SHOW LOW
Permanent Base Adjustment
2017-2018

NAME
Type of Alternative Expenditure 
Limit
Year
Effective
Next Home
Rule Election
SIERRA VISTA
Permanent Base Adjustment
2001-2002
SNOWFLAKE
Home Rule
2021-2022
Fall 2024
SOMERTON
Home Rule
2021-2022
Fall 2024
SOUTH TUCSON
Home Rule
2021-2022
Fall 2024
SPRINGERVILLE
Permanent Base Adjustment
2019-2020
ST. JOHNS
Home Rule
2021-2022
Fall 2024
STAR VALLEY
Home Rule
2019-2020
Fall 2022
SUPERIOR
Home Rule
2021-2022
Fall 2024
SURPRISE
Permanent Base Adjustment
2007-2008
TAYLOR
Home Rule
2021-2022
Fall 2024
TEMPE
Permanent Base Adjustment
2002-2003
THATCHER
Permanent Base Adjustment
1998-1999
TOLLESON
Home Rule
2021-2022
Fall 2024
TOMBSTONE
Home Rule
2021-2022
Fall 2024
TUCSON
Permanent Base Adjustment
2014-2015
TUSAYAN
Home Rule
2021-2022
Fall 2024
WELLTON
None
WICKENBURG
Permanent Base Adjustment
2006-2007
WILLCOX
None
WILLIAMS
Home Rule
2019-2020
Fall 2022
WINKELMAN
Permanent Base Adjustment
2019-2020
WINSLOW
None
YOUNGTOWN
Permanent Base Adjustment
2013-2014
YUMA
None