DALLAS — Phoenix tax collections have fallen below expectations for the second year in a row, leading to an estimated budget deficit of up to $52 million, according to acting city manager Ed Zuercher.
Zuercher blamed the deficit on slower-than-expected revenue growth and increases in mandatory expenses. Those include pension contributions, insurance and the replacement of aging city vehicles.
Phoenix has struggled to regain its budget balance five years after a record $277 million deficit in 2009. The projected deficit for the fiscal year 2015, starting July 1, follows three years of revenue growth that led to restoration of some services curtailed during the recession.
For the fiscal year ending June 30, officials expect revenue to fall $25 million below the budgeted target. That represents about 2.5% of the roughly $1 billion budget.
The mandated expenses could send the deficit to $52 million, he told the city council. Zuercher said expenses can be lowered without affecting city services. However, slow-growing revenues could lead to deficits in the next five years, according to the city's budget staff.
Officials expect costs to rise by about $48 million due to increasing personnel costs and equipment replacement and building maintenance needed to continue basic operations.
For fiscal 2014, the city's current estimates show an approximately 1% deficit on a roughly $1 billion general fund budget.
In March, voters overwhelmingly approved two pension reform propositions that were expected to save the city $83 million by 2022, and $600 million by 2037.
Phoenix carries ratings of AA-plus from Standard & Poor's and Aa1 from Moody's Investors Service with stable outlooks.
