Just as it appears Phoenix might be turning the economic corner, a new fiscal crisis has arisen.
As any homeowner knows, property values in Phoenix have fallen, thanks to the meltdown of the housing market, foreclosures and a glut of homes and businesses on the market.
While the drop in assessed value means lower property taxes for home and business owners, it also means less revenue for the city.
In Phoenix, the fall in assessed value has been dramatic, 14.7 percent in the last year from $18.8 billion to $16.1 billion, and it is expected to fall even more next year, down to $12.8 billion.
If the shrinking property tax trend continues, the city of Phoenix could end up without enough money to pay its bond debt, or property taxes will have to go up to bring in more money or the anemic general fund will need to be raided to pay the debt, taking cash from other city services.
By 2017 the shortfall could hit $85 million, according to city estimates.
Raising property taxes is not the answer, according to Councilman Sal DiCiccio.
Instead, he wants a new approach to the constant budget crisis when the council meets May 11 to discuss floating the property tax rate above the current $1.82 for every $100 of assessed value.
"The middle class is getting pounded by the city of Phoenix, raising the food tax, raising the water fees, the sewer fees and on small business owners, and at the same time has refused to make any cuts at City Hall. We have asked for a structural change. But it's easier to go to the public and ask for more money than it is to make cuts," DiCiccio said.
In the past few years, the city has cut more than $300 million from the budget, but much of that has come from the elimination of vacant positions.
What DiCiccio wants is the city to change the way it does business, which he believes will cut costs, increase efficiency and reduce the financial burden for taxpayers.
"The city of Phoenix doesn't need more money, it's how the money is spent," DiCiccio said.
At the top of his list of things to look at are the benefits for city employees that average $100,000 each. He said that until those costs are brought under control it will be impossible for the city to balance the budget.
"It's the same thing we have been talking about," DiCiccio said.
The latest financial crisis comes from a policy that for the past 14 years has capped the city property tax rate at $1.82 for every $100 of assessed value, with the primary levy of 88 cents going to the city's general fund and rising by 2 percent a year. The rest of the $1.82 is going to pay debt service.
But if assessed values continue to fall, and if the city keeps the primary levy going to the general fund, there won't be enough left out of the $1.82 to pay the city's debts.
DiCiccio said that changes could be made in Phoenix in six months to cut costs and red tape and revamp how services are delivered, alleviating the need to raise the property tax rate.
The council meets at 2 p.m. Tuesday, May 11 in the City Council Chambers, 200 W. Jefferson St., where the property tax problem will be discussed during the policy session, which is open to the public.
For more information, contact DiCiccio at email@example.com or call his office at (602) 262-7491.
Valley 2009 primary and secondary property tax rates
Source: Maricopa County Assessor's Office