Summary:
Final Budget
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. 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 over 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 over the FY2024 level. The operating budget supports 1,430.50 full-time equivalent positions.
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.
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. This was done on May 7, 2024. 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 changes discussed at that meeting were incorporated into the Tentative Budget and into this Final Budget.
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 of $1.44 for the upcoming year. Likewise, 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 in water supply. Solid waste is being hit hard by the high costs of fuel and vehicles, as well as by reduced recycling revenues and increased landfill costs. The start date for the utility rate adjustments will be July 1, 2024. 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 Final 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.
Truth-In-Taxation
During the FY2025 budget deliberations, the City Council recommended the City’s primary property tax rate remain at $.2900 per $100 of assessed valuation.
By maintaining the existing tax rate, the primary property tax levy for FY2025 is $6,211,216. Based on the statutory calculation, the increases in the primary tax levy stem from two sources. An estimated $245,629 in increased collections comes from valuation increases to existing properties and $117,998 results from assessments on new construction within the city limits.
In compliance with Section 42-17104 and 42-17107, Arizona Revised Statutes, the City of Peoria notified property taxpayers through a press release and an advertisement placed in the Peoria Times on May 9, 2024 and in the Daily Independent on May 21, 2024 of the City’s intent to increase the City’s primary property tax levy. The statute also requires a public hearing and roll call vote regarding the proposed levy increase. The hearing and vote must take place on or before the adoption of the final budget.
Combined with the secondary tax rate of $1.1500 per $100 of assessed valuation, the total estimated tax rate for FY2025 is $1.4400 per $100 of assessed valuation.
Adoption of the primary and secondary property tax levies is scheduled for the June 18, 2024, City Council meeting.