DALLAS — Starved for revenue to fund critical city services, Phoenix is looking at which programs to preserve when a controversial tax on food goes into effect April 1.
Among the candidates for funding are subsidies for bus and light-rail service, community centers, and after-school programs.
With a revenue shortfall of about $245 million over two years, the Phoenix City Council approved extending the sales tax to food in January to save the jobs of about 500 police and firefighters.
The tax on groceries is expected to generate $62.5 million through June 2011. The 2% food tax is set to expire in five years. Phoenix raised its sales tax to 2% from 1.8% in 2007 via a voter-approved measure.
Under the provision approved by the City Council, purchases with food stamps would not be taxed.
While 16 states charge tax on food, Arizona allows cities to decide whether to levy the food tax. With Phoenix now taxing food, Mesa and Surprise are the only cities in the metro area that are not.
Taxes of all kinds prompt bitter opposition in conservative Arizona. A group of opponents was organizing to appear at a public budget hearing last night. Phoenix Mayor Phil Gordon has said that widespread opposition at a series of public hearings could prompt the City Council to halt the measure.
The food tax is “regressive and hurts the poor and those on fixed incomes the most,” council member Sal Diciccio said. “Most importantly, it shifts responsibility for solving this money problem from government to the public.”
In the state Legislature, lawmakers have finally approved Gov. Jan Brewer’s request for a temporary one-cent increase in the state’s 5.6 cent sales tax. The proposal must still win approval from the voters in May before it goes into effect.
With the state’s budget falling $1.6 billion short of revenue to cover spending, Brewer last year sought the three-year sales tax hike in three special sessions of the Legislature. Despite announcement of an agreement, lawmakers failed to produce a revenue-boosting measure in 2009.
With less than five months remaining in the fiscal year, Arizona’s budget remains unbalanced.
Meanwhile, other cities in the Phoenix area are using other venues to raise revenue. Scottsdale and Tempe want to increase their hotel bed taxes and car rental tax rates to help finance a new $84 million stadium for a Chicago Cubs spring training facility in neighboring Mesa.
Glendale also raised its sales tax to 2.2% from 1.8% in 2007.
The sales tax hikes in Phoenix and proposed state sales tax increase come as Arizona has suffered a sharp drop in business and tourism-related revenues.
A survey of hotels in the region found that revenue per available room fell 25.3%, the biggest decline among the top 25 U.S. markets. That followed an 8% decline in 2008.
