With revenue growth slowing significantly, Peoria residents should expect a very conservative budget for the next fiscal year.
Deputy City Manager Kevin Burke said the city will be taking a “cautious approach” on the fiscal year 2025 budget, which will be completed by summer.
As budget planning continues, the city will need to be careful about adding new ongoing costs, but is pretty healthy on one-time revenues, he said.
“Last year this time we brought forward a lot of caution relative to the budget and we talked about clouds gathering, and I think in hindsight I’d say the last 12 months was a bit like this last Peoria summer. We saw lots of clouds gather and no rain. And that was OK from an economic standpoint, but those clouds are still there, and we are certainly seeing some economic activity that are giving some mixed signals,” Burke said.
The budget team has been following national economic indicators that have pushed them to this conclusion. At first glance, the economy appears to be healthy with a strong GDP at 4.9% and the unemployment rate under 4%, as well as job creation higher than pre-pandemic levels.
But Peoria CFO Sean Kindell said the economy is kind of on “shaky ground.”
Even though wages have been going up, inflation is still high, so spending power has decreased, he said.
In last few months, consumer debt service — not including mortgages — has risen to its highest level since before 2010. In tandem, personal savings have reached the lowest point since before 2010. And U.S. credit card debt has risen to $1.08 trillion, which is the highest it has ever been.
Finally, with the conflict in the Middle East, Kindell said, there is a concern about fuel prices.
All these factors are leading city budget officials to even more caution for the fiscal year 2025 budget.
“What that tells us is this consumer driven economy has been based on people spending their savings and running up their credit cards. We don’t feel like that is a sustainable model,” Kindell, said. “That causes us to have concern about this economy going forward and that is the message of caution that we are delivering.”
Local sales tax, state shared sales tax and income tax make up 65% of the city’s general fund revenue.
The city experienced big gains in sales tax revenues recovering from the pandemic, and because of this, Peoria still has about $50 million in one-time resources of available capacity in the general fund.
In fiscal years 2022 and 2023, local sales tax revenues were about $70 million and $73 million, respectively. The city experienced unprecedented sales tax growth in those years, with growth of 14% in 2021 and 11% in 2022.
Deputy Finance Director Peter Christensen said those days are over — sales tax grew only about 5% in fiscal year 2023 over the previous year, and little to no growth in sales tax revenue is planned for next year.
About 18 months ago sales tax revenues were in double digit growth. It has shrunk to under 2%, according to numbers recorded in September. Last March, April and June, the city recorded negative local sales tax growth in the city.
It is a similar story for state shared revenue, Christensen said.
“This is a different picture than a year ago,” he said.
Philip Haldiman can be reached at phaldiman@iniusa.org, or on Twitter @philiphaldiman. We’d like to invite our readers to submit their civil comments, pro or con, on this issue. Email AZOpinions@iniusa.org.
Meet Philip Haldiman is an award-winning journalist who most recently took first place for investigative reporting in 2023 from Arizona Newspapers Association. He joined Independent Newsmedia, Inc., USA, in 2015, covering Sun City West his first year. Since 2016, he has covered the city of Peoria. Prior to coming to INI, he was a reporter with The Arizona Republic for seven years, covering numerous cities throughout the Valley. Before that, he was a freelance writer.
Community: Haldiman spearheads the Peoria Independent Hometown Heroes Awards program, honoring local individuals and businesses that give back to the community. He has hosted local candidate forums over the years and is a member of the Society of Professional Journalists. Haldiman also served as a member of the Journalism Program Community Advisory Board at Glendale Community College. Outside journalism, Haldiman served as a member of the city of Peoria Complete Count Committee for the Census, 2019-2020. Lastly, he has served as a member of his HOA governing board since 2021.
Education: Arizona State University with a BA in Journalism and Mass Communications and a BA in Theater.
Random Fact: Haldiman is a fourth-generation Arizonan as well as wrote and produced an autobiographical comic book about his time spent in Hollywood and his life as a cult film star.
Hobbies: He enjoys hiking Arizona’s mountainous landscapes and is currently working on a play for the stage.
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