City or County resident, you pay taxes. But what happens to those funds after they land in City of Tucson or Pima County coffers?
"It is true … that every exaction of money for an act is a discouragement to the extent of the payment required, but that which in its immediacy is a discouragement may be part of an encouragement when seen in its organic connection with the whole. Taxes are what we pay for civilized society.... — Supreme Court Justice Oliver Wendell Holmes Jr., 1927"
Most of us can agree, as former Supreme Court Justice Oliver Wendell Holmes Jr. said nearly a century ago, that some form of taxes are required if we want a civil society.
But after that basic agreement, things get murkier. What exactly is a civil society? How many police do we need, and how many parks? Should the city and county help to fund charities? Which ones, and how much should it all cost?
When it comes to Tucson and Pima County, the cost, at least, is clear. Each has an annual budget topping a billion dollars.
The county’s $1.4 billion budget is chopped into five “pie” sections: the general, revenue, enterprise, service, and projects funds. The city budget of $1.7 billion is broken into seven segments — general, enterprise, special revenue, internal service, capital projects, debt service and fiduciary funds.
Neither is a simple document. The county’s 917-page budget and the city’s 314-page one lay out very complex plans for funding and spending the combined $3 billion, and a lot of it is guided by state, federal, or local laws. The money comes from dozens of sources — taxes, fees, grants, bonds, the State of Arizona, and the federal government … each with its own set of rules. And both the city and county dole out money to dozens of programs, from health care for low-income residents, to roads, to water drops for undocumented border crossers.
All of it, however, is helping each of us, says Pima County Communications Director Mark Evans.
“We have a very low crime rate. We have a good road system. I know people complain about the potholes, but we have a program that is repairing them. We have an outstanding park system. So I think there’s benefit, every single day, in the taxes that people are paying,” Evans concludes.
Both the city and county get money from a very broad array of sources — federal, state and local — but there are major differences. The city pays for day-to-day operations via sales taxes, while the county uses property taxes. Both also charge fees for services, such as parks, buses, and construction permits. Although they appear on one bill, there is division of labor over water service — the city collects fees to provide water, and the county charges sewer fees for wastewater disposal.
This year the county will spend just over $600 million on operations, including the sheriff’s department, courts, and personnel; $120 million on special revenue expenditures, such as transportation and public works; and the rest on things like debt management, and capital projects — mostly road construction.
The city will spend $1.2 billion this year to keep the wheels turning, $134 million to repay debt, and $357 million on capital projects, including major construction projects. That’s an increase of $173 million over last year.
Interestingly, the COVID-19 pandemic didn’t decimate the city’s revenue, observes Tucson Assistant City Manager and Chief Financial Officer Joyce Garland.
“Originally, when the pandemic hit and the governor put out the emergency order, the only historical record we had for any kind of upheaval in the financial world was the Great Recession [in 2009],” Garland says. “We thought our sales tax revenue would just drop quickly and deeply.”
But that didn’t happen, in part because of a law signed by Gov. Doug Ducey in 2019 requiring online retailers to collect Arizona sales taxes. So when Americans shifted en masse to online buying, the city didn’t take a huge hit.
“That’s Amazon, Wayfair, Overstock — all of those major retailers, if they ship material into Arizona, if they ship into the city of Tucson, they have to pay our sales tax,” Garland explains.
In some sectors, sales taxes actually have gone up during the pandemic.
“People, being at home, started doing home remodeling, and with that a lot of sales taxes are coming from Home Depot or from Lowe’s. All of our contractors in the city are so busy right now it’s hard to get an appointment,” Garland says.
The county, which relies more heavily on property taxes, didn’t see that revenue increase.
The city and county also get federal grants funneled through the Pima Association of Governments and state shared revenue. Although the city funds most daily operations with sales taxes, the lion’s share of revenue doesn’t come from it.
“If you look at our overall budget, over a billion dollars, the majority of our money comes from the federal government because the City of Tucson provides public housing — Section 8 — so a lot of money funnels through there,” Garland says.
Tucson had the same sales tax for many years, but because people don’t stop buying, the city usually plans for about two to three percent growth year after year. This year $206 million was projected, and the city will likely end the fiscal year with $229-$230 million raised, which is roughly the same as last year, Garland confirms.
The pandemic forced the city to give up some revenue. Buses have been free this past year, and many park fees have been dropped. The city also forgave rent for some non-profits in city properties, including the Southern Arizona Transportation Museum, but all of that money is being made up with increased sales taxes.
The pandemic didn’t change county revenue significantly, in part because the county is funded by property taxes.
Evans explains the county budget as two basic pots of money: required expenditures and discretionary funds. The state requires some things, such as law enforcement and courts.
“The court system is one of the largest segments of the budget,” Evans says.
The superior court handles felony criminal cases, family law, probate, and bigger civil cases. Justice courts, by precinct, handle misdemeanors, code violations, small claims, and minor civil disputes. The juvenile court is a division of superior court.
Both the city and county manage road projects funded by the Regional Transit Authority (RTA), a regional taxing body created to plan and fund major road projects regionwide. All major road jobs in Pima County are authorized by voters and funded by an RTA sales tax.
“We do all the work, then they reimburse us for the cost of the voter-approved projects. That happens in Oro Valley, South Tucson, Marana — the whole region,” Garland says.
The city and county also get federal grant money from the Pima Association of Governments. That pays for signals, crosswalks, and other safety-related expenses. The city and county do paving and road maintenance. Things like pothole repairs, streetlights, and right-of-way maintenance come from a state-allocated gasoline tax.
That tax will likely get an overhaul in coming years. As cars get more fuel-efficient and more people turn to electric cars, gas tax revenue will slowly dry up. The state gasoline tax hasn’t changed in decades, and cars use less gas now. As more people purchase electric vehicles, a change in the tax is inevitable.
“They’re going to have to come up with a different way to generate revenue to help with taking care of the road system,” Garland comments.
Although Arizona has a history of shortchanging Tucson funding-wise, Garland thinks the city is getting a fair shake now. But that doesn’t mean the city is just accepting what the state offers.
“I think we’re like all Arizona cities. We all want as much as we can get, and we ask for it,” she adds.
Although the city has a property tax, it is small compared to the county, which has four tax levies — the primary property tax (which pays for the general fund); Library district tax; Regional Flood Control District tax, created in the 1970s; and the debt funds secondary property tax for capital projects.
Pima County is unusual in that it has shifted away from funding major projects with voter-approved bonds and more toward a “pay-as-you-go” system in which the county borrows against general fund revenue. County Administrator Chuck Huckleberry has insisted that the county keep repayment short, in some cases 15 years instead of 30.
That insistence has led to Pima County having a great “credit score,” compared to other Arizona counties, Evans says.
“We have one of the highest bond ratings of any government in Arizona. So instead of paying three percent over 15 years on $100 million, we pay 1.5 percent because our bond rating is so good,” he notes.
Evans calls comparing tax rates a bit of a political football. Pima County, with the second-highest primary property taxes in the state, often is compared to Maricopa County, but that’s not the entire picture.
Maricopa County has a sales tax, jail tax, and health care tax. When you add all of those things together, the taxes come out to be pretty equal.
“At the end of the day, a tax is a tax is a tax,” Evans observes. “They just have different types of taxes.”
When it comes to offering bang for your buck, Evans thinks the county does a pretty good job. They are required to have law enforcement, courts, environmental protections, a treasurer, recorder and animal care.
“We are required to provide a superior court, a system of incarceration and law enforcement. We also are required to have development services and zoning codes, along with environmental protections.”
Optional services make a very short list, Evans says.
“I don’t think there’s a state law that mandates that counties have to have parks, but we’d be a pretty poor county indeed, if we didn’t,” he maintains.
In addition, Pima County invests in preserving and fostering what we already have — aerospace and defense jobs, and tourism. The Arizona-Sonora Desert Museum, Old Tucson, Colossal Cave, and the Pima Air and Space Museum are all on county land.
Historic Canoa Ranch, which the county used bonds to restore, is a county property. And the renovated downtown historic courthouse soon will open to the public with a regional visitor center, University of Arizona Mineral Museum, and offices for Visit Tucson.
“And that is all supported from county tax dollars, and I think it benefits everyone,” Evans reflects.