Tucson Votes on Spending Limit

DALLAS — Voters in Tucson, Ariz. will decide on Nov. 5 whether the city can add up to $50 million in annual spending to ease chronic budget pressures.

Under Proposition 401, the city would be allowed to exceed limits imposed by the state constitution. In 1980, the Arizona Legislature capped what municipalities can spend in a year based on population growth and inflation.

The state limit is adjusted every year, but Tucson officials say the adjustment is not enough for the city to meet its needs. The city's expected costs will exceed the state limit by $9.2 million in 2016 and could exceed it by $33.4 million two years later.

Tucson's spending limit for the current fiscal year is $662 million, not counting state and federal grants and voter-approved bonds.

Tucson Water capital projects, streetcar expenses and inflation related to transit services account for most of the city's spending growth, officials said.

The legislature gave cities two ways to bypass the limits with voter approval.

One option — home rule — allows cities to adjust the limits each year to fit their needs but requires a vote every four years. Tucson had home rule from 2007-10, but voters rejected it in 2009.

The second option for increasing spending requires a one-time vote. The city last raised the base in 1987 by $46.9 million, which covered city spending needs for 25 years.

With a population of 523,471, Tucson is Arizona's second-largest city but has experienced slower growth rate than Phoenix and its suburbs.

Moody's Investors Service downgraded Tucson's general obligation bond rating to Aa3 from Aa2 on May 29 and returned the outlook to stable from negative. Fitch Ratings lowered its outlook on Tucson's AA rating to negative on May 23. Standard & Poor's assigns its AA-minus rating with a stable outlook.

As of its last issue in June, Tucson had about $232 million of outstanding general obligation bonds and $252 million of certificates of obligation, according to Moody's.

For the 2013 fiscal year the city closed a small general fund budget gap through savings and budget cuts.

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Arizona
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