The town of Gilbert remains in a strong economic position as it prepares for a new fiscal year, but shifting revenue streams and upcoming policy decisions will require careful financial management, officials said.
According to Budget Director Kelly Pfost, Gilbert's revenue primarily comes from sales tax, state-shared income tax, and other sources, with sales tax accounting for more than 61% of total revenue.
However, this structure makes the town's financial health more susceptible to economic fluctuations compared to its peers.
"Our revenue mix in Gilbert, ideally, is like a three-legged stool," Pfost said at the town’s financial retreat. "You talk about your retirement planning — don't put all your eggs in one basket, spread it out, have some diversity. That is the best practice in the financial industry."
A notable challenge in the coming year will be an $8 million revenue loss due to the Arizona Legislature’s elimination of the residential rental tax.
Additionally, state-shared income tax revenue is expected to decline by approximately $5 million.
Another significant concern is the potential loss of $18 million in food tax revenue, which would have a "substantial impact to Gilbert in our operations." The Legislature has been considering eliminating the tax.
Meanwhile, expenditures are also increasing.
The town plans to allocate approximately $75 million in cash funding for quality-of-life projects in fiscal 2026. This additional spending will put pressure on the town’s budget as it seeks to balance community needs with fiscal responsibility.
One positive financial development is Gilbert’s ability to pay off its University Building debt early, a move that could save the town more than $15 million in interest payments.
"We have saved up enough money that, should council decide, we can pay those bonds off entirely on July 1 when it's callable," Pfost said.
The final decision on this repayment will be addressed in an April 22 council meeting.
Regarding property taxes, the town presented council members with three options for its secondary property tax rate.
The first option would lower the rate to $0.964 per $100 of assessed valuation, covering only the town’s debt service with minimal reserves. The second option, which council members seemed to favor, would maintain the current rate of $0.98, ensuring a 7% reserve buffer. The third option would raise the rate slightly above $1 to maximize reserves and allow for faster debt repayment.
"The faster you pay back debt, the less interest you pay,” Pfost said. “The slower you pay back debt, the more interest you pay."
Without any formal decision, council members largely supported the middle option, citing its balance of stability, reserve protection and long-term cost savings.
Long-term financial considerations
Beyond the immediate budget cycle, Gilbert does long-term financial planning that extends over a 20-year horizon to ensure fiscal sustainability.
Pfost and her team have updated long-term financial models to reflect expected changes in revenue and expenditures.
"We do see revenues are not planning to grow as much into the future as they have in the past," she said.
As the town nears full build-out in the next five or so years, revenue growth is expected to slow, requiring a shift in financial planning.
"We’re going to be slowing down and having to fit within a planned structure of what our level of service is planned to be," Pfost said.
One key concern for council members is the impact of revenue losses on staffing and essential services. Councilmember Monte Lyons brought up staffing levels while revenue streams become more constrained.
"I'm really concerned about our staffing being adequate, and I know that’s a big portion of our expenditures," he said.
Additionally, the potential elimination of the food tax would have a substantial impact on long-term revenues.
"Although it doesn’t seem like $18 million would be a ton, it’s $18 million of ongoing operating money," Pfost said.
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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