Summary:
Each year, the City undertakes a comprehensive program to develop a balanced budget. The annual budget serves as the major policy and financial planning tool of the City, detailing how resources will be allocated, and how City Council’s priorities can best be addressed. This spending plan strives to account for a certain degree of economic uncertainty while funding new demands in critical core city services. As always, the budget adheres to the Council-adopted Principles of Sound Financial Management.
For FY2025, the City of Peoria budget appropriation totals $995 million, an increase of 4.7 percent from the previous year. The primary reason for the increase in the total budget is personnel. The FY2025 budget adds 41 new FTEs totaling $5.4 million ongoing, plus an additional 26 one-time contract employees at a cost of $2.8 milion. The budget also includes compensation adjustments for existing employees in the form of cost-of-living and merit increases. These adjustments are necessary to stay competitive in what has been a very tight labor market the last few years.
The proposed budget consists of four major components, including planned operating expenditures, capital improvements, annual debt obligations, and appropriated reserves.
The operations component of the budget totals $458.6 million, which represents a 10.2 percent increase from the FY2024 level. Staff made the following changes to the operating budget after the City Council Budget Workshop on March 28:
- Reduce the carryover for the tactical aviation unit by $1,477,400.
- Add Contract Economic Development Assistant City Attorney ($203,383 1-time, $759 ongoing).
- Add Contract Economic Development Paralegal ($99,391 1-time, $759 ongoing).
- Add Legal Training ($71,000 1-time).
- Add Reclass of Assistant City Attorney to Senior Assistant City Attorney ($7,500 ongoing).
- Add Reclass of Senior Budget Analyst to Budget Coordinator ($7,500 ongoing).
The capital budget includes investments in various capital improvements throughout the City and is the first year of the 10-year Capital Improvement Program. The $432.3 million FY2025 capital budget represents an increase of 5.3 percent from last year’s capital budget, of which $250.2 million is carryover of funding from FY24 for projects not completed. The 10-year Capital Improvement Program totals $1.4 billion and represents a 25.7 percent increase from a year ago. Staff made the following changes to the FY2025 capital budget after the City Council Budget Workshop on March 28:
- Increased the budget for Project Grandview Half Street Improvements (ED00036) from $2,626,715 to $4,400,000 and moved the project up to FY2025.
- Deleted the 83rd Av and Hillcrest Blvd Traffic Signal project (EN00777) and its $412,729 budget from the CIP, as it will be completed in FY2024.
- Consolidated two formerly separate projects—Old Town Vacant Parcel Mobile Place Making Phase II (CS00258) and Downtown Redevelopment (EN00646)—into a single project, Downtown Redevelopment (EN00646).
The FY2025 annual debt obligations are estimated at $51.6 million. This category includes annual City debt service payments for issued general obligation and revenue bonds.
State budget law requires a jurisdiction to adopt a Tentative Budget that sets the maximum level of appropriation for a fiscal year. As a result, the FY2025 budget includes contingency appropriation, which provides authority to expend reserves to cover unforeseen or emergency situations. The contingency level is based on the City’s financial reserves, and totals $52.5 million for the upcoming year. The City Council has the sole authority to utilize this contingency appropriation for unexpected needs or emergencies.
The City Manager’s recommended budget was delivered to the City Council on March 14 of this year. At the Council Budget Study Session, held on March 28, Council members discussed the proposed budget. The Tentative Budget incorporates the changes discussed during that meeting.
The budget as submitted limits the financial burden placed on our residents through rates and fees. The FY2025 recommended budget assumes no increase to the overall property tax rate for the upcoming year. The city’s retail sales tax rate remains at 1.8 percent.
The FY2025 budget includes a combined utility rate adjustment of 8.4 percent for the average residential user of water, wastewater, and solid waste services. The adjustment to the water rate is being driven by inflationary pressures on labor, water supply, chemicals, and electricity, but also by the drought situation on the Colorado River, which requires large infrastructure investments to build redundancy into the distribution system. Solid waste is being hit hard by the high costs of fuel and vehicles, as well as reduced recycling revenues and increased landfill costs. The start date for the utility rate adjustments will be July 1, 2024. These rate adjustments were approved in 2023. Overall, Peoria residents continue to enjoy comparatively low utility rates among Valley cities.
It is recommended that the annual budget for FY2025 be in place by July 1, 2024, in order to have continuing legal authority to make payments for salaries, expenses and other obligations of the City of Peoria. Adoption of the Tentative Budget at this time will comply with the requirements set forth by Arizona Revised Statutes for the publishing of the proposed budget and public hearings held prior to final budget adoption.
The next step, once the Tentative Budget is approved, is to hold a public hearing and adopt the Final Budget at the May 28 City Council meeting, followed by the adoption of the Property Tax rate at the June 18 City Council meeting.