8.A.
City Council Meeting - FINAL
- Meeting Date:
- 06/17/2025
- From:
- Heidi Derryberry, Assistant Finance Director
TITLE:
Public Hearing: Fiscal Year 2025-26 Budget and Property Tax Levy
STAFF RECOMMENDED ACTION:
- Hold the public hearing to receive citizen input
- Convene Special Meeting
Executive Summary:
This public hearing is being held to comply with Arizona State Statutes. Arizona Revised Statutes require a public hearing on the proposed final budget and property tax levy, A.R.S. Section 42-17104.
Financial Impact:
Upon adopting the final Fiscal Year (FY) 2025-26 Budget, the City may commit and spend funds for community needs as described in the budget. The budget is funded through numerous revenue sources, including property tax.
The City is proposing a flat primary property tax levy of $7,230,680 on existing properties (levy from prior year), plus an increased levy of $33,728 on new construction, for a total primary property tax levy in FY 2025-26 of $7,264,408. The primary property tax rate to support this levy is 0.6045 per $100 of assessed valuation (lower than the prior fiscal year). The proposed levy is less than the maximum allowable primary property tax levy allowed for FY 2025-26, which is $8,181,322.
The City is proposing a secondary property tax levy of $9,569,140 on existing properties, plus a levy of $44,635 on new construction, for a total secondary property tax levy in FY 2025-26 of $9,613,775. The proposed secondary property tax rate is 0.8000 per $100 of net assessed valuation (same as the prior fiscal year).
The City is proposing a flat primary property tax levy of $7,230,680 on existing properties (levy from prior year), plus an increased levy of $33,728 on new construction, for a total primary property tax levy in FY 2025-26 of $7,264,408. The primary property tax rate to support this levy is 0.6045 per $100 of assessed valuation (lower than the prior fiscal year). The proposed levy is less than the maximum allowable primary property tax levy allowed for FY 2025-26, which is $8,181,322.
The City is proposing a secondary property tax levy of $9,569,140 on existing properties, plus a levy of $44,635 on new construction, for a total secondary property tax levy in FY 2025-26 of $9,613,775. The proposed secondary property tax rate is 0.8000 per $100 of net assessed valuation (same as the prior fiscal year).
Policy Impact:
The FY 2025-26 Budget is the financial plan of the City for the upcoming fiscal year.
Previous Council Decision or Community Discussion:
- January Council Retreat on January 30, 2025, and January 31, 2025
- February Budget Retreat on February 13, 2025, and February 14, 2025
- March Capital Improvement Budget Retreat on March 27, 2025
- Council Budget Work Session on April 24, 2025, and April 25, 2025
- Tentative Budget Adoption on June 3, 2025
Options and Alternatives to Recommended Action:
1. Conduct the public hearing; or,
2. Delay the public hearing
2. Delay the public hearing
Background and History:
Budget adoption:
The adoption of the tentative budget set forth into motion a legally mandated time sequence of actions of which the Council must adhere to adopt a final budget and to levy property taxes. If this time sequence is not met as required by statute, the tentative budget adoption, the final budget adoption, the property tax levy actions, and related publications must be started over. The final budget adoption must occur after a public hearing and Council must convene a Special Meeting to adopt the final budget. The budget must be adopted by the third week of July. The County must adopt the property tax levy by the first week of August.
The key dates in this year's process are presented below:
The tentative adoption established the maximum appropriation for the City for the FY 2025-26 budget year. The budget legal schedules were published in the Arizona Daily Sun on June 5, 2025, and June 12, 2025. The final budget adoption allows the City to commit and expend resources as determined to be needed through the FY 2025-26 budget process. There have been no changes to the final budget recommended for adoption from that presented as the tentative budget. The recommended City of Flagstaff appropriation for FY 2025-26 is $522,729,426.
Property tax levy:
Primary property taxes are accumulated in the General Fund and pay for general services, which include, but are not limited to, public safety, parks and recreation, other public work services, and general administrative and management functions within the City.
Secondary property taxes support debt service payments on numerous city capital projects, including the Aquaplex, fire stations, open space, street/utility projects, forest restoration, the core service facility, courthouse, infrastructure and housing projects.
The City has proposed a flat primary property tax levy in FY 2025-26 of $7,264,408. The maximum allowable primary property revenue under state law for FY 2025-26 is $8,181,322. The primary property tax rate will decrease from a rate of 0.6363 in FY 2024-25 to a rate of 0.6045 in FY 2025-26 due to the total valuation of all existing properties, which is increasing by 5.3%. Five years of historical data are shown below:
Truth in Taxation legislation:
Every year, the Truth in Taxation legislation requires that the County Assessor, on or before February 10, must transmit to each city and town an estimate of the total net assessed valuation of the city, including new property added to the tax roll. If the proposed primary tax levy amount, excluding amounts attributable to new construction, is greater than the levy amount in the previous year, the City must go through the Truth in Taxation procedures. It is important to note that it is the levy amount and not the rate which triggers the Truth in Taxation procedure. The City of Flagstaff has not triggered the Truth in Taxation notification and hearing for FY 2025-26 and no additional notifications are required.
The adoption of the tentative budget set forth into motion a legally mandated time sequence of actions of which the Council must adhere to adopt a final budget and to levy property taxes. If this time sequence is not met as required by statute, the tentative budget adoption, the final budget adoption, the property tax levy actions, and related publications must be started over. The final budget adoption must occur after a public hearing and Council must convene a Special Meeting to adopt the final budget. The budget must be adopted by the third week of July. The County must adopt the property tax levy by the first week of August.
The key dates in this year's process are presented below:
- June 3, 2025: Tentative adoption of the budget by Council
- June 17, 2025: Proposed budget and property tax levy public hearing
- June 17, 2025: Final budget adoption (In a special meeting)
- June 17, 2025: First reading property tax ordinance
- July 1, 2025: Final reading and adoption of the property tax ordinance
The tentative adoption established the maximum appropriation for the City for the FY 2025-26 budget year. The budget legal schedules were published in the Arizona Daily Sun on June 5, 2025, and June 12, 2025. The final budget adoption allows the City to commit and expend resources as determined to be needed through the FY 2025-26 budget process. There have been no changes to the final budget recommended for adoption from that presented as the tentative budget. The recommended City of Flagstaff appropriation for FY 2025-26 is $522,729,426.
Property tax levy:
Primary property taxes are accumulated in the General Fund and pay for general services, which include, but are not limited to, public safety, parks and recreation, other public work services, and general administrative and management functions within the City.
Secondary property taxes support debt service payments on numerous city capital projects, including the Aquaplex, fire stations, open space, street/utility projects, forest restoration, the core service facility, courthouse, infrastructure and housing projects.
The City has proposed a flat primary property tax levy in FY 2025-26 of $7,264,408. The maximum allowable primary property revenue under state law for FY 2025-26 is $8,181,322. The primary property tax rate will decrease from a rate of 0.6363 in FY 2024-25 to a rate of 0.6045 in FY 2025-26 due to the total valuation of all existing properties, which is increasing by 5.3%. Five years of historical data are shown below:
| Property Tax Rates | FY 2021-22 | FY 2022-23 | FY 2023-24 | FY 2024-25 | FY 2024-26 Proposed |
| Primary | 0.7186 | 0.6954 | 0.6634 | 0.6363 | 0.6045 |
| Secondary | 0.8000 | 0.8000 | 0.8000 | 0.8000 | 0.8000 |
| Total | 1.5186 | 1.4954 | 1.4634 | 1.4363 | 1.4045 |
Truth in Taxation legislation:
Every year, the Truth in Taxation legislation requires that the County Assessor, on or before February 10, must transmit to each city and town an estimate of the total net assessed valuation of the city, including new property added to the tax roll. If the proposed primary tax levy amount, excluding amounts attributable to new construction, is greater than the levy amount in the previous year, the City must go through the Truth in Taxation procedures. It is important to note that it is the levy amount and not the rate which triggers the Truth in Taxation procedure. The City of Flagstaff has not triggered the Truth in Taxation notification and hearing for FY 2025-26 and no additional notifications are required.
Connection to PBB Priorities and Objectives:
The budget process has allowed for public participation which is vital for the City Council in determining the current year goals and objectives. The budget translates Key Community Goals and Objectives into a fiscal plan.
Connection to Regional Plan:
None.
Connection to Carbon Neutrality Plan:
The adoption of the Annual Budget and Financial Plan supports the Carbon Neutrality Plan by allocating financial resources the CNP goals.
Connection to 10-Year Housing Plan:
The adoption of the Annual Budget and Financial Plan supports the 10 Year Housing Plan by allocating financial resources to the plan's strategies.