Gilbert officials are preparing for a challenging financial landscape in fiscal year 2025-26, according to a recent presentation on the town's financial projections.
Budget Director Kelly Pfost highlighted a projected tightening of revenue across key sources and the measures necessary to maintain stability amid these constraints during the Gilbert Town Council retreat Nov. 20.
The general fund, which covers essential services such as police, fire and parks and recreation, is expected to see a decline in revenue from its three primary sources: local sales tax, state-shared sales tax, and urban revenue sharing, Pfost said.
For fiscal year 2026, revenues are projected to drop to about $140 million, a significant decrease from the $155 million actual revenue recorded in fiscal 2024. The reduction is attributed to several factors, including the full implementation of the state’s flat income tax policy, an $8 million loss from the elimination of residential rental taxes and slower economic growth.
“Fiscal (2024-)25, we are doing fine as long as the whole market doesn’t drop out, sales tax goes (down) crazy,” she said. “We’ll ride out fiscal '25 just fine. Fiscal '26, we are looking for a very tight year.”
That, she said, will require the town to do careful planning and make spending adjustments.
Officials stressed while ongoing operations are expected to remain stable, the town's ability to absorb unexpected shocks will be limited.
“Lots of people want things,” she said. “It’s going to be ‘keep the wheels on the bus,’ not a lot of new things. “It means we don’t have some one-time money. We don’t have growth.’
Gilbert’s economic outlook has been impacted by a softening in retail trade and construction activity, key contributors to local sales tax revenues, Pfost said. While some areas, such as the Gateway region, continue to experience growth, others, like the Northwest area and the Heritage District, have seen revenue flatten or decline compared with fiscal 2023 levels.
One notable concern is the potential impact of broader legislative changes on local revenue. The loss of the residential rental tax was a decision made at the state level, as part of a deal to advance Proposition 400, which benefits regional transportation but reduces municipal income, Mayor Brigette Peterson said.
Additionally, there is uncertainty about whether the Arizona Legislature might eliminate other local revenue sources, such as food taxes, in the future.
“We’ll see how that goes,” said Peterson, who leaves office in January. “Good luck with that.”
Council and staff also discussed the need for contingency plans to address unanticipated infrastructure failures or other emergencies that could strain resources further.
Despite these challenges, the town has continued to make strategic investments, including funding for police, fire, and parks projects starting in early 2025, as a result of its newly passed sales and bed tax increases and new use tax.
While fiscal 2026 is projected to be tight with a focus on balancing the budget responsibly while minimizing disruptions to essential services, Pfost expressed cautious optimism about fiscal 2026-27, contingent on economic recovery and stable sales tax revenues.
“It is unknown what will happen,” she said. “If our sales tax stays pretty good, we'll be able to have another flat year. If it picks up and starts to grow again, then we'll have a little bit more. We'll have to wait and see how the economy goes over the next year.”
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).
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