The City of Phoenix ended the 2024-25 fiscal year with $11.6 million more than it anticipated but faces \u201cmany fiscal challenges and competing priorities\u201d next year, according to a new report to City Council.<\/p>\n
\u201cThe higher than anticipated ending fund balance is good news and will be beneficial as we move forward,\u201d City Manager Jeff Barton wrote.<\/p>\n
But Barton, who retires in mid-November, said his successor and the council will \u201cface many fiscal challenges and competing priorities\u201d that \u201cwill require strategic and difficult decisions to ensure the budget remains sustainable and balanced.\u201d<\/p>\n
The city had initially projected $2.158 billion in revenue but realized a bump from sales tax income.<\/p>\n
Barton is proposing that $1.6 million be allocated to the city\u2019s Housing Trust Fund \u201cto further invest in affordable housing initiatives,\u201d bringing its total allotment for the year to $5.2 million.<\/p>\n
He said the rest of the surplus will be placed in reserves as the administration begins the months-long process of creating a spending plan for the fiscal year beginning next July 1.<\/p>\n
And that plan will have to account for a number of challenges, including\u00a0 \u201cimpacts from the federal administration and the One Big Beautiful Bill Act,\u201d the report states.<\/p>\n
Barton noted that new income and business tax cuts that take effect next year and the cancellation of some federal grants the city had been counting on are among those impacts.<\/p>\n
Stating the tax cuts would cost Phoenix $56.7 million cumulatively over the next three fiscal years, Barton said the city already is losing a $12.9 million grant for \u201clow carbon transportation materials\u201d and another $15 million grant for electric vehicle charging infrastructure.<\/p>\n
\u201cAdditionally, the (city) Public Transit Department has indicated delays in grant application reviews, projects and reimbursement requests due to the reductions in staffing at the Federal Transit Administration,\u201d he said.<\/p>\n
But federal actions aren\u2019t the only pressure points on the city\u2019s finances.<\/p>\n
Union contracts expire next June and labor negotiations will started before the end of this year.<\/p>\n
While he gave no indication on the cost impact, Barton reminded that a multi-year job classification compensation study Council approved in 2023 \u201cmoved the City closer to its goal of becoming Arizona\u2019s premier public sector employer.<\/p>\n
\u201cThe city began the C&C study to not only ensure job classifications and pay structures are aligned with the local municipal market but to also make the city\u2019s pay ranges competitive in the local market. Setting those pay ranges demonstrates the value the city places on its employees and the community they serve.\u201d<\/p>\n
The city also need sot brace for added expense in addressing rampant homelessness and it faces \u201cadditional unfunded needs\u201d as a result of the loss of federal pandemic relief funding.<\/p>\n
Any remaining funds from the COVID era are being spent this year, leaving the city with a $22 million hole.<\/p>\n
\u201cFunding is necessary to maintain operational support at several sites the City opened over the last three years in an effort to increase shelter capacity in our homeless services systems,\u201d Barton wrote.<\/p>\n
In addition, the $500 million General Obligation Bond that voters approved in 2023 funded numerous new facilities ranging from fire stations to splash pads that now need money to operate.<\/p>\n
Those operational costs will cost an additional $11.7 million in the coming fiscal year and triple by 2028-29.<\/p>\n
There also are another dozen items that \u201cadd significant pressure and uncertainty to the General Fund operating budget\u201d that incoming City Manager Ed Zuercher and his aides will have to manage after Barton leaves.<\/p>\n
Leading that list are \u201ceconomic uncertainty and volatility from tariffs, trade policy, federal reserve actions, geopolitical concerns, housing affordability, and overall consumer confidence.\u201d<\/p>\n
In addition, rising employee benefit costs \u2013 particularly Public Safety pension obligations and health care insurance \u2013 loom over budget preparations for next year, Barton said.<\/p>\n
\u201cIt is important to mention that Phoenix\u2019s public safety pension costs will continue to increase for the foreseeable future based on information staff received from the Public\u00a0 Safety Personnel Retirement System (PSPRS) actuary,\u201d Barton said.<\/p>\n
Annual pension costs for police officers are currently estimated at $200 million and projected to rise to $250 million by the end of the decade. Likewise, firefighter pension costs are expected to climb from about $125 million annually to $150 million in that time frame.<\/p>\n
Those estimates are on top of about $4.5 billion in Phoenix still owes the state Public Safety Personnel Retirement System in unfunded pension liability.<\/p>\n
Inflation also remains a problem as the city tries to figure not only the construction cost of repairing major facilities but also replacing aging vehicles and \u201ccritical IT infrastructure and systems.\u201d<\/p>\n
Adding to the city\u2019s budget planning are concerns about over \u201cpotential reduction in state and federal funding or new unfunded state or federal mandates, including environmental requirements and attempts by the Legislature to further reduce revenues,\u201d Barton warned.<\/p>\n
The city administration\u2019s next major word on finances won\u2019t come until February, when it releases a preliminary report on 2026-27 spending and revenue projections along with a multi-year General Fund forecast.<\/p>\n
That forecast earlier this year showed the city faces a deficit of between $64 million and $102 million in 2026-27.<\/p>\n
A trial budget will be submitted to the council on March 24, and, following hearings, a proposed budget will be announced May 5 with Council making a decision two weeks later.\u00a0\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"The City of Phoenix ended the 2024-25 fiscal year with $11.6 million more than it anticipated but faces…\n","protected":false},"author":3,"featured_media":296762,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5131],"tags":[5229,5643,1587,126758,94425,28040,1589,78288,150477,150478,67,586,132,5230,68,2969],"class_list":{"0":"post-296761","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-phoenix","8":"tag-america","9":"tag-arizona","10":"tag-az","11":"tag-ed-zuercher","12":"tag-jeff-barton","13":"tag-one-big-beautiful-bill-act","14":"tag-phoenix","15":"tag-phoenix-city-council","16":"tag-phoenix-housing-trust-fund","17":"tag-phoenix-public-transit-department","18":"tag-united-states","19":"tag-united-states-of-america","20":"tag-unitedstates","21":"tag-unitedstatesofamerica","22":"tag-us","23":"tag-usa"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115360094187317004","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/296761","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=296761"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/296761\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/296762"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=296761"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=296761"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=296761"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}