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 FY2026, the City of Peoria budget appropriation totals $1.2 billion, an increase of 20 percent from the previous year. The primary reason for the increase in the total budget is the capital budget. Because of supply chain issues, labor shortages, and a preponderance of projects in the planning and design stage, the carryover from FY 2025 is much larger than normal. In fact, the carryover amount ($293.9 million) is more than half of the capital budget of $572.0 million. Several very large projects are now under construction, or will be in the coming months, so the City is expecting a much larger capital spend in FY2026 and thus a smaller carryover amount for the subsequent year.
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 $478.4 million, which represents a 4.3 percent increase over the prior year. Personnel costs account for 50 percent of the citywide operating budget and 75 percent of the general fund operating budget. The city’s total authorized strength is 1,469.25 full-time equivalent positions, including 38 newly added FTEs for FY2026. Adjustments to employee compensation—including cost-of-living increases, merit increases, health insurance premium increases, and new positions—account for three-fourths of the year-over-year increase to the City’s operating budget.
The capital budget includes many different projects across the City and is the first year of the 10-year Capital Improvement Program (CIP). The $572.0 million FY2026 capital budget represents an increase of 32 percent from last year’s capital budget, while the 10-year CIP totals $1.9 billion and represents a 37 percent increase from a year ago. Much of the increase is attributable to a brand new category within the CIP called the Peoria Innovation Core, which groups together all the infrastructure projects that are part of a multi-decade endeavor to bring commerce and jobs to north Peoria through an agreement with the Arizona State Land Department.
The FY2026 annual debt obligations are estimated at $53.0 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 FY2026 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 $88.6 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 26, Council members discussed the proposed budget. The Final 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 FY2026 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 FY2026 budget includes a combined utility rate adjustment of 5.5 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 4, 2025. Overall, Peoria residents continue to enjoy comparatively low utility rates among Valley cities.
It is recommended that the annual budget for FY2026 be in place by July 1, 2025, 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.