Gilbert will soon bump up against a state law that limits how much money the town can spend if it goes through with plans to fund its priority capital projects.
That's why the town plans to go to voters this fall asking for permission to set a new limit that will allow the town to put in place parks and recreation amenities residents have asked for, plus meet safety needs outlined by the police and fire departments.
The law is the state’s aggregate expenditure limit, which became part of the state constitution when voters approved it in 1980. It came in the wake of the California property tax revolt and was seen, at the time, as a way to address voters’ concerns without gutting a major revenue source.
The original limit was set in 1980. The state adjusts it each year based on population growth and inflation.
Gilbert is racing to put what officials see as important infrastructure in place before the town reaches build-out in the next 7-10 years. It's planning to increase its sales tax as a means of funding the capital projects.
But the aggregate expenditure limit can prevent the town from spending the money for the projects even if it has the money on hand, town officials told council.
That is the situation schools, which also are subject to the expenditure limit, have faced the past three years. Though the state provides much of the funding for school districts and other local educational agencies, they have required a waiver from the Arizona Legislature to avoid having to make millions of dollars in budget cuts late in the fiscal year.
Gilbert council members directed staff at the town’s financial retreat March 11 to prepare for two ways of getting around the limit: a permanent base adjustment and a “capital projects accumulation fund.” Both would require council and voter approval.
The permanent base adjustment, as the name suggests, would permanently raise the expenditure limit with the state still adjusting it from the base amount each year for population growth and inflation.
Gilbert previously used a permanent base adjustment for fiscal year 1997-98, but most of its peer cities that use this option have done so since then, including Avondale, Glendale, Peoria, Queen Creek, Scottsdale and Tempe, according to staff's presentation to council at the financial retreat.
Furthermore, Gilbert’s preliminary limit for fiscal year 2024-25 of $568.19 million is smaller than all six of those cities, though each has a smaller population than Gilbert.
The capital projects accumulation fund, if approved by voters, allows the purchase of land, buildings and improvements to be excluded from the expenditure limit.
Either method would eliminate the issue for the town, which projects to go over the limit in fiscal years 2025-26 and 2026-27, Budget Director Kelly Pfost said. Scottsdale is the only city in the Valley to have both a permanent base adjustment and a capital projects accumulation fund.
The penalties for exceeding the limit include withholding part of Gilbert’s portion of state shared-income tax and redistributing it to other cities, Pfost said. The amount withheld depends on by how much a municipality exceeds the limit.
Council passed on the idea of a one-time exception or on passing an alternative expenditure limitation, known as the “home rule option,” which would allow the adopted budget each year to become the expenditure limit.
That option requires a renewal every four years, and council saw it as too risky because failure to renew would reset the limit at the 1998 level. Phoenix, Chandler and Mesa use the home-rule option.
The permanent option helps council avoid levying an increased secondary property tax to pay for the capital projects. Proceeds of bonds and interest paid on them are two of the exceptions to the expenditure limit, but cash-funding the projects, and thus avoiding additional interest, does count against the limit.
Council members said they did not a see a combination of asking for bonds and raising the expenditure limit as being something voters would approve.
“It's hard to say, can we borrow up to $600 million and increase our expenditure limit at the same time, right?” Mayor Brigette Peterson said. “Voters won't understand that.”
Councilmember Kathy Tilque expressed a similar concern in asking for both raising the permanent expenditure limit and a capital projects accumulation fund.
Councilmember Chuck Bongiovanni said even asking for an adjustment on the limit would be difficult as voters might not see it as putting in place a more reasonable expenditure limit to serve residents' needs while still staying within a balanced budget.
“I think most voters will see this like they do the federal government (debt ceiling limit),” he said. “They'll see this as a negative thing rather than a positive thing with us. It’ll just take a lot of education.”
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.
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).
By 
Comments
No comments on this item Please log in to comment by clicking here