Three mayors in the metro Phoenix area are urging Arizona Governor Katie Hobbs to provide details on her strategy for mitigating the financial consequences resulting from the repeal of a tax on rentals. The bipartisan group of mayors, including Phoenix Mayor Kate Gallego, Tempe Mayor Corey Woods, and Mesa Mayor John Giles, expressed concern in a letter about the lack of information on Hobbs’ plan as cities face budget deadlines and potential cuts.

The mayors pointed to Hobbs’ prior commitments to collaborate with cities in addressing the impact of revenue loss while safeguarding state revenues that support municipalities. Despite these assurances, the letter emphasizes that there is no shared plan to replace the revenue lost due to the rental tax repeal.

Legislative Session and Unanswered Questions

The letter highlights the ongoing legislative session and underscores the mayors’ worry that a concrete plan to replace the foregone revenue has not yet been communicated. It requests an opportunity to work with the governor’s office to find solutions for restoring essential funding to Arizona cities and towns.

Hobbs’ Prior Actions and Silence on the Issue

The mayors’ letter adds public pressure to an issue that Governor Hobbs has not addressed this year. The repeal of the rental tax was not mentioned in her State of the State speech, nor does it appear in her budget proposal released in January. The mayors suggest that the lack of information extends beyond them, indicating that the public and stakeholders are also in the dark about the governor’s plans.

Governor Hobbs signed a bill last year that prohibits municipalities from imposing a residential rental tax after January 1, 2025. The letter notes that the mayors have not received more information from Hobbs’ administration than what is publicly available.

Uncertainty Surrounding Budget Negotiations

The mayors express an understanding that Hobbs may be considering a delay in the implementation of the cuts as part of budget negotiations. However, the letter emphasizes the need for collaboration to find viable solutions to restore essential funding to cities.

Political Compromises and Consequences

Last year, Hobbs signed the rental tax repeal bill, a move prompted by a Republican-backed agreement. The agreement involved repealing the tax in exchange for Republican votes on a transportation funding measure called Proposition 400. The mayors’ letter suggests that the repercussions of this political compromise are now affecting cities as they navigate budgetary challenges.

Financial Impact and Varied Tax Rates

The rental tax, ranging from 1.5% to almost 3% in applicable cities, contributes varying amounts to municipal revenues. For instance, Phoenix estimated a collection of $90 million from the rental tax in the 2025 fiscal year.

Potential Threat to Essential Services

Mayors Gallego and Giles have expressed concerns that the change in tax policy could jeopardize essential services such as police and fire departments. The letter echoes the mayors’ previous warnings that cuts may impact public safety, homelessness services, or affordable housing.

Challenging Financial Landscape

The mayors highlight the challenging financial landscape, citing a significant shift from a small surplus forecast to a $1.7 billion deficit over two years. Despite the difficulties, the mayors remain committed to working with Hobbs to find solutions that address the impact on shared priorities and advance the state.

Collaborative Planning for Arizona’s Future

In the face of budgetary challenges and the impending repeal of the rental tax, the mayors express hope for collaborative planning with the governor’s office. They emphasize the importance of mitigating the impact on shared priorities and propelling the entire state forward. The letter concludes with a call for joint efforts to navigate the complexities and uncertainties surrounding the financial implications of the rental tax repeal.