Gilbert looks to increase sales tax to pay for 'quality of life' projects

By Tom Blodgett
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Gilbert will pursue a half-cent sales tax increase later this year to fund its priority capital improvement projects for parks, police and fire. 

That was the direction the town council gave Monday to staff at the town’s annual financial retreat, a significant milepost in the town’s budget preparation for the coming fiscal year. 

That direction, paired with adding a use tax and nearly doubling the town's bed tax, represented a decision to avoid going to voters asking for a general obligation bond that could have potentially raised the town’s secondary property tax rate from $0.98 per $100 assessed valuation to as much as $1.15. 

Instead, the town will rely nearly entirely on sales and use taxes to raise $650 million that will fund 24 priority projects.  

The town pared the list of priority projects down from 33 projects that would have cost more than $1.07 billion as presented in December at a workshop for council. 

Council members indicated a distaste for the property tax or a belief that residents had no appetite to pass a bond at the moment as reasons to avoid going to voters on a bond.  

They also indicated that a sales tax felt more equitable as it would not just be property owners paying, would include collecting from nonresidents who spend money in town and residents could choose how much they pay through their choices on some purchasing decisions. 

“I despise property taxes in any form,” Councilmember Jim Torgeson said. “At least with the sales tax, if there's somebody doesn't want that extra half-cent, they can do whatever they got to do, not buy the extra cup of coffee at Starbucks or whatever it is, to avoid that half a percent.” 

A use tax is typically applied to items that were purchased from out-of-state retailers or through online transactions for vendors who do less than $100,000 in annual sales in Arizona. Gilbert has not been charging a use tax but the state and other municipalities in the Valley do, Budget Director Kelly Pfost said. 

The risk, though, as confirmed by Pfost in replying to questions from council, is that sales tax is a more volatile source of revenue that is subject to less-than-expected collections during times of economic downturn. 

Furthermore, collections can be affected by legislative actions, such as an Arizona law, enacted in 2023, that bars municipalities from collecting a rental tax beginning in January 2025. The Legislature also passed a ban on collecting a tax on food this session, but Gov. Katie Hobbs vetoed it. 

The town would still be bonding to pay for some of the projects, but they would be “municipal property corporation” bonds that do not require voter approval, but rather approval from a citizen’s board and council. The bonds are paid back usually over 20 years from sales and use tax collections, Pfost said.  

The town also would have the ability to cash fund some of the projects, depending on timing, costs and collections. 

The secondary property tax is more stable. If voters approve a bond question, the town can control the rate through measures like the timing of bond sales. Additionally, because of rising property values, Arizonans nearly always experience a 5% increase in their valuations, the maximum allowed under state law. 

The bed tax, which council directed staff to present an increase from 2.8% to 5%, was described as “low-hanging fruit” by the retreat’s facilitator, Matt Lehrman, in summarizing council’s quick approval of it. Hotels generally are OK with the tax as some of the revenues go to promoting tourism, Councilmember Chuck Bongiovanni said. 

“The bed tax is a no brainer to me,” Bongiovanni said. “Bring it up to 5(%) because, I mean, seriously, when you go to a hotel, how many you guys are looking at the sales tax? ‘I can't book here because the sales tax is 1% more.’ You look for location. You look for how much that bed rate is itself, and that's where I'm at.” 

However, Pfost said the increase would only raise about $1.4 million toward the goal. 

Staff presented different scenarios for paying for $650 million worth of projects, including different combinations of voter-approved bonds repaid through the secondary property tax, sales tax and use tax. 

Council directed staff to come back to them with a proposal to increase the sales and use tax in the fall with it likely to take effect in January 2025. 

Staff also had council weigh in on the priority list and what should be included or excluded from the staff-generated list. 

The list includes:  

From parks: trail lightings, crossing and improvements; additional phases for Gilbert Regional and Desert Sky parks; a pickleball complex and splash pad at Freestone Park; a south Gilbert recreation center; a shared use path on the Western Powerline Trail; and a Riparian Education Center. 

From police: additional phases of the Victims Advocacy Center; a crime lab; renovating the SanTan substation; a community office; and a public safety building expansion. 

From fire: station rebuilds and remodels; fire administration building remodel; and a fire fleet facility. 

Other priorities listed in the December workshop would be pushed off until a later date, the three department directors said. 

“When we really look at the quality of life, I think what makes Gilbert so successful and what's going to make Gilbert successful in the future is those three groups (parks, police, fire) couldn't be more aligned with how they provide those services and how they support each other,” Parks and Recreation Director Robert Carmona said. “And I think as we go through that, we're going to see more of those efforts come together.” 

We would like to invite our readers to submit their civil comments, pro or con, on this issue. Email AZOpinions@iniusa.org. Tom Blodgett can be reached by email at tblodgett@iniusa.org or follow him @sp_blodgett on X.   

Tom Blodgett
Senior News Editor | Gilbert

tblodgett@iniusa.org

Meet Tom
Tom Blodgett joined Independent Newsmedia, Inc., USA, in 2022, when the company acquired Community Impact Newspaper's Phoenix-area properties. Raised in Arizona, he has spent more than 35 years in journalism in the state.

Community: He has served as an instructional professional in the Walter Cronkite School of Journalism and Mass Communication since 2005, and is editorial adviser to The State Press, the university's independent student media outlet. He also is director of operations for an 18U girls fastpitch softball team from Gilbert.

Education: Arizona State University with a BS in Journalism. 

Random Fact: He lived in Belgium during his freshman year of high school.  

Hobbies: Tweeting enthusiastically about ASU softball (season-ticket holder) and grumpily about other local sports (pessimistic fan).