01 27 26 Permanent Base Adjustment - Chief Financial Officer Artz

PERMANENT BASE ADJUSTMENT DISCUSSION
January  27, 2026

BACKGROUND
• Arizona Constitution and Arizona Revised Statutes impose an 
expenditure limitation on every City and Town in the State.
• Baseline expenditures from FY 1979-80
• State Economic Estimates Commission adjusts limitation each year
• Standard inflation rate 
• Population growth

BACKGROUND
• Budget 1979/80
$966,494
• Population (1978)
4,190
• Population (2025)
7,400
• Population growth
7400/4190=1.7661
• Inflation growth
3.6712
• 2026-27 Exp Limitation    $966,494 x 1.7661 x 3.6712 = $6,266,463

BACKGROUND
• Alternative options to the State-imposed limit
• Home Rule
• Permanent Base Adjustment
• Capital Projects Accumulation Fund
• One-Time override
• Expenditures from certain revenue sources are excluded 
from the expenditure limitation
• Bond proceeds
• Interest income
• Grants
• Intergovernmental revenues

WHY DOESN’T THE STATE-IMPOSED 
LIMITATION WORK IN TOLLESON?
• Assumes the 1979/80 budget provided sufficient service levels
• Volunteer Fire Department
• Regional WWTP
• Senior Center, Library, Aquatic Center
• Does not account for new revenue sources
• Additional Wastewater revenues
• Increases in sales tax rates
• E-Commerce Revenue
• Does not account for increases in commercial activity
• Growth factor covers population and average inflation – not revenue growth
• Regional shopping destination

HOME RULE OPTION
• Allows City to set alternative expenditure limitation 
at adopted budget amount
• Local control
• Home Rule option has been in place for 40 years
• Must be approved by the voters
• Approval required every 4 years

PERMANENT BASE ADJUSTMENT 
OPTION
• Permanent base adjustment modifies the 
expenditure base from 1979-80
• One-time approval by the voters
• Reduction of election costs and staff time every 4 
years
• Provides stability to service levels
• 35,000,000 x 1.7661 x 3.6712 = $226,929,721

RECOMMENDATION
• Staff recommends that Council provide direction to 
move forward with a Permanent Base Adjustment 
election for 2026.

ESTIMATED STATE-IMPOSED 
LIMITATION
Total Expenditures 
Under
State-Imposed
Limit
=
Estimated
Exclusions
+
Projected
State-Imposed
Expenditure
Limitation
=
Inflation
Factor
(Nov-2023 Memo)
x
Population
Factor
x
1979-80
Base Limit
Fiscal Year
$34,977,526
=
$29,000,000
+
$5,977,526
=
3.5392
x
1.7475
x
$966,494
2025-2026
$25,266,463
=
$19,000,000
+
$6,266,463
=
3.6712
x
1.7661
x
$966,494
2026-2027
$51,084,193
=
$44,500,000
+
$6,584,193
=
3.7559
x
1.8138
x
$966,494
2027-2028
$30,309,667
=
$23,500,000
+
$6,809,667
=
3.8340
x
1.8377
x
$966,494
2028-2029