City prepares measure to increase sales tax to half a cent for public safety, housing and parks in Tucson

Tucson voters could be asked to approve a new half-cent sales tax to fund investments in public safety, affordable housing and parks in a special election in March if the City Council advances a planned ballot measure next month.

The new tax would impose a half-cent tax on all transactions within the city for the first ten years after its passage, which city officials estimate would add $800 million to the city’s budget over ten years.

The “quality of life” measure, dubbed the “Safe and Vibrant City” by City Manager Tim Thomure, calls for a new 0.5 cent sales tax on city businesses to be spent in five “vital areas”:

• Affordable housing and accommodation: 17.5% of the total
• Neighbourhood and community resilience: 16.75%
• Enhanced emergency measures: 22.75%
• Technology investments: 12.25%
• Capital investment for first responders: 30.75%

To meet statutory deadlines for scheduling elections, the City Council would need to vote to call the March 11, 2025, special election at its meeting scheduled for September 11, 2024. The Council will discuss the proposal during its afternoon study session next Tuesday.

The tax would raise about $80 million each year, but that’s a “pessimistic projection,” Thomure told the Sentinel. Actual revenue could be higher, he said, with any increases being spent according to the percentages set out in the ballot proposal.

The Tucson city government has a total annual budget of about $2.3 billion, of which about $749 million comes from the general fund. The rest is in corporate funds like Tucson Water that rely on special revenue sources, he said.

The City Manager, appointed by the Mayor and City Council to oversee the day-to-day operations of the city government, clarified: “This is a new tax, not an extension or renewal.”

Thomure pointed to what politicians see as the success of previous voter-approved tax measures, such as Prop. 101. That law, passed in May 2017, created a half-cent sales tax to fund public safety and road improvements over five years.

In May 2022, Tucson voters again approved a road repair tax, with 73% in favor of a half-cent tax through 2032. Another one-tenth-of-a-cent (0.1%) sales tax was approved by voters in 2017 to fund the Reid Park Zoo through 2027.

The proposed half-cent tax is not intended as a countermeasure by the city to a possible overhaul of the Regional Transportation Authority, which would be funded by a statewide sales tax, Thomure said.

“This is by no means a ‘we’re going our own way’ operation,” he told the Sentinel.

Some City Council members have suggested that the city should not participate in any of the RTA Next plans, but instead fund transportation within city limits with a standalone sales tax to ensure that Tucson residents’ priorities are met.

Thomure said ongoing discussions between the city, RTA officials, Pima County and the other cities and towns that make up the RTA are bearing fruit. Most of the priorities identified by council members have been addressed in the latest draft, he said.

“To be clear, the proposed ballot proposal and its areas of authorized spending were deliberately crafted to be compatible with any version of the RTA Next ballot proposal and its elements,” he wrote in a memo to the mayor and city council.

In that memo, the city manager noted that “over the past decade, the Arizona State Legislature has passed laws that have limited local control and created financial challenges for cities, including Tucson.”

“Former Governor Doug Ducey’s imposition of a flat 2.5% income tax significantly reduced statewide tax revenues, directly impacting state revenues that are critical to city budgets,” he said.

For fiscal year 2025, revenues going to cities and towns have fallen by nearly 19%, he said – a $27.4 million cut just for Tucson’s share of state revenue.

“Staff now estimates that the city will incur a loss of nearly $400 million in state revenue over the next 10 fiscal years,” Thomure wrote.

His memo includes a long list of potential projects that could be funded with the new tax:

“We need to come up with something that is financially viable, that addresses some of the needs of the community and also meets the priorities of the community,” Councilman Paul Cunningham told the Sentinel in May when discussing a possible ballot proposal.

“I don’t think it’s really about transportation,” Cunningham said at the time. “It’s more about the well-being and safety of the community.”

The East Side councilman did not rule out that the council could advance a separate transportation sales tax proposal in the future if the city does not reach an agreement with neighboring counties in Pima County.

“Maybe we’ll add another half-cent and do something instead of the RTA and just make a big penny,” he said in May. “But right now, I don’t think that’s the discussion.”

The Council has postponed previous special elections

Although the Tucson City Council asked the Arizona Attorney General’s Office for legal advice on whether it would be legal to put a sales tax proposal on the ballot in this summer’s primary election, it did not ask voters to approve a tax increase this summer.

According to Tucson City Clerk Suzanne Mesich, council members would have had to approve the ballot text by the April 25 council meeting in order to present a proposal to voters in the July 30 election.

While there were no details yet on what might be on the primary ballot, the council began discussing the possibility of implementing a sales tax in February “to improve the quality of life of our residents and businesses.” In March, Arizona Attorney General Kris Mayes, in response to a request from state Senator Rosanna Gabaldón, said the city could hold the election because it was “a purely municipal matter.”

While most municipalities are required by law to hold a sales tax vote on the November ballot, Tucson is exempt from this law because it is a charter city.

“Under Arizona law, when actions under a city’s charter conflict with state law and the matter is of purely municipal interest, municipal action prevails. The timing of the special election in Tucson to amend the charter is a matter of purely municipal interest, even if the proposed amendment involves a transaction privilege tax,” Mayes wrote.