Title
Fiscal Year 2026-27 City Manager's Proposed Budget - Citywide
Description
This report transmits a balanced Fiscal Year (FY) 2026-27 City Manager's Proposed Budget for community review and comment. No action is required at this time. Action on the FY 2026-27 budget is scheduled for the May 19, 2026 City Council meeting.
THIS ITEM IS FOR INFORMATION, DISCUSSION, AND POSSIBLE ACTION.
Report
The FY 2026-27 City Manager's Trial Budget presented to City Council on March 24, 2026 included a projected General Fund (GF) surplus of $163.3 million. Since that time, staff have made minor revisions to expenditure estimates, and the City has come to agreements with labor groups. Based on these updates, the GF surplus is now projected at $162.5 million. The surplus is recommended to be allocated to key Council Priority areas, employee compensation, and a set-aside to help ensure FY 2027-28 remains balanced. These allocations are discussed in greater detail later in this report and are documented in Attachments A and B.
The City of Phoenix is committed to transparency and community engagement in the budget process. Between March 30 and April 16, the City hosted 12 community budget hearings to obtain feedback from residents on the proposed budget and conducted significant additional outreach. Based on this feedback, the available additional $2.4 million has been allocated to several new or enhanced programs, which are detailed later in this report. Additional information on community feedback and engagement efforts will also be discussed in the report and is documented in Attachment D.
The proposed FY 2026-27 City Manager's Proposed Budget also includes information on Non-General Fund additions (Attachment C) and detailed schedules for all City Funds (Schedules 1-11). No changes are recommended to Non-General Fund additions presented in the Trial Budget.
Summary
The City of Phoenix continues to be an economic leader in the country, highlighted by diverse business and economic opportunities, a strong job market, and continued population growth. These core strengths, combined with the leadership of the Mayor and City Council, have helped put the City on firm financial footing. However, geopolitical issues, federal and state policy uncertainty, ongoing concerns with affordability, and uneven economic data underscore the continued need for careful financial planning.
The proposed balanced FY 2026-27 City Manager's Budget reflects this careful planning by recommending strategic investments in key Council priority areas. These GF additions are summarized in Attachment A and itemized with additional detail in Attachment B. The budget also reflects $50.0 million for employee compensation increases, underscoring the vital role City staff play in delivering the services residents rely on every day. In addition, the budget looks to the future, setting aside $75.0 million to help ensure FY 2027-28 remains balanced. These GF additions and uses totaling $162.5 million are summarized below:
- Community Health and Safety - $1.6 million.
- Children, Youth, and Families - $9.4 million.
- Homeless Service Continuity - $18.4 million.
- Housing Affordability - $6.6 million.
- Planning and Development Customer Service Enhancements - $1.5 million.
- Employee Compensation - $50.0 million.
- Set-Aside to Balance FY 2027-28 - $75.0 million.
The proposed FY 2026-27 budget includes 69.9 ongoing full-time equivalent (FTE) positions needed in GF (45.9 FTE) and Non-GF departments (24.0 FTE), and represents conversion of existing budgeted resources for critical position needs. Funding for these positions has been identified and accounted for in department operating budgets and therefore no additional funding is necessary. The budget also includes Non-GF additions in the Aviation Department. More information on position conversions and Non-GF additions can be found in Attachments B and C.
Additionally, detailed FY 2026-27 budget information and schedules are provided for all City funds (Schedules 1-11).
Community Feedback on the FY 2026-27 Proposed Budget
Resident input was solicited at 12 community budget hearings held between March 30 and April 16, 2026. Extensive outreach was conducted to raise awareness about the hearings and other ways to provide input on the budget. This outreach included live television, streaming, and Internet-based advertising through Cox Communications, as well as Spanish language advertisements on local Spanish radio station La Onda. Information was also distributed through social media platforms, the City website, and the Phoenix at Your Service newsletter. In addition to the budget hearings, community members also submitted feedback by phone and email. These efforts resulted in 391 comments submitted on the budget.
Attachment D includes information on the City's efforts to address many of the comments made by residents, a summary of comments by category, minutes of each budget hearing, and all email and phone comments. The public can continue to access information on the proposed budget, including video recordings of completed budget hearings, at phoenix.gov/budget.
Proposed Additions and Changes to the City Manager's Budget
The FY 2026-27 City Manager's Proposed Budget includes an available GF surplus of $162.5 million. This amount has been updated from the Trial Budget GF surplus of $163.3 million based on refined expenditure estimates and reflecting finalized negotiated employee compensation increases.
Based on these updates and the feedback of residents, the City Manager's Proposed Budget recommends several changes from the Trial Budget. These changes are summarized below. Changes are identified in this report as *NEW* and are included in Attachments A and B.
- Flexible Emergency Financial Assistance - increase funding for flexible emergency financial assistance from $1.5 million to $3.15 million in one-time funding.
- Teen Services Programming - increase funding for teen services programming from $500K to $937K in ongoing funding.
- Parks Services Permit Staffing Support and Service Connectors - add ongoing funding of $379K to provide staffing for the Parks Services Permit program, which is scheduled for consideration by the Mayor and Council on May 6, 2026. If the City Council does not adopt a permitting system at its May 6 meeting, this funding will be reallocated for the May 19 Council budget adoption vote.
- Employee Compensation - adjust the employee compensation set-aside from $53.2 million to $50.0 million to reflect the finalized amounts needed for labor agreements. This adjustment is due to slightly more of the final compensation package occurring in the second year of the contract.
- Childcare Set-Aside / Supplemental Nutrition Assistance Program (SNAP) Navigation - for FY 2026-27 only, allocate a portion of the $5 million ongoing set-aside for childcare affordability to fund SNAP navigation support.
Additional detail on these changes is provided in the following section, as well as Attachments A and B. The City Manager's Proposed Budget does not include any Non-GF changes from the Trial Budget.
Proposed FY 2026-27 General Fund Additions - $162.5 million and 57.9 positions
The FY 2026-27 City Manager's Proposed Budget invests in key Council priority areas, employee compensation, and set-asides to keep future budgets balanced. These investments are summarized below. Additional details, including positions, dollar amounts, and impacted departments, are provided in Attachments A and B.
*NEW* Community Health and Safety - $1.6 million and 11.5 positions
Community health and safety remains a high priority for the City Council, and the City Manager's Proposed Budget includes several additions designed to address this priority. First, it proposes to invest $500K in one-time funds for additional streetlights and streetlighting upgrades in the 27th Avenue Community Safety Plan corridor, to further the progress made in improving safety and quality of life along 27th Avenue and the I-17 corridor. Next, it includes $500K in one-time funds for security lighting enhancements at City parks, helping to promote safe recreational opportunities for Phoenix residents. These improvements include enhanced playground lighting at Buffalo Ridge, Moon Valley, Sueno, and Western Star Parks, and perimeter lighting improvements at Hilaria Rodriguez Park. The City Manager's Proposed Budget includes $266K in partial-year, ongoing operating costs for the new 2023 GO Bond-funded Esteban Park recreation center and for the new Lone Mountain Park. These additions include 8.5 positions, with combined full-year, ongoing operating costs estimated at $764K. *NEW* Additional ongoing funding of $379K has been identified to add staffing to support the Parks Services Permit program, scheduled to be voted on by Mayor and Council on May 6, 2026. This funding would add an Administrative Assistant II in Parks to coordinate the permitting process to ensure collaboration with partners and compliance with the Medical Treatment and Food Distribution in City Parks Ordinance. Additionally, two Caseworker III positions in the Office of Homeless Solutions would work with qualified outreach teams from medical provider groups and provide cooperative outreach at parks to assist individuals experiencing homelessness.
*NEW* Children, Youth, and Families - $9.4 million and 0.5 positions
Children, youth, and families are a vital part of the Phoenix community, and the City Manager's Proposed Budget invests in them in several ways. First, childcare costs represent a significant financial challenge for Phoenix families. The City Manager's Budget includes a $5 million ongoing set-aside to address this challenge by exploring options to help bring down the cost of childcare for Phoenix families. *NEW* A portion of the childcare set-aside is recommended to be used in FY 2026-27 only for SNAP navigation services. These services are intended to assist Phoenix residents experiencing SNAP application and certification issues due to changes in the state's administration of this program and new federal compliance requirements. Additional programmatic details on the childcare set-aside and SNAP navigation services will be developed in the coming months. *NEW* Next, the City Manager's Proposed Budget includes $3.15 million in one-time funds to provide flexible emergency financial assistance to Phoenix residents. This funding is intended to help prevent homelessness and stabilize housing and food security for low-income individuals and families in light of recent reductions and restrictions in federal funding, which have impacted SNAP recipients, refugees, and other community members. This funding has been increased from the Trial Budget amount of $1.5 million and will allow more residents experiencing financial distress to receive assistance. The assistance will include both targeted one-time crisis assistance and stability assistance, which includes case management support. Up to $200K of the funding may be used on staffing to support this expanded program. *NEW* The City Manager's Proposed Budget also includes $937K in ongoing funds, including 0.5 part-time positions, for the Parks and Recreation Department to invest in several teen services programs, including structured tutoring opportunities, enhanced and expanded recreation programming, and to improve program affordability that ensures Phoenix families can participate in Parks programs. This funding has been increased from the Trial Budget amount of $500K and expands the number of community centers able to offer enhanced programming and youth and teen engagement. Specific community centers impacted by this addition are listed in Attachment B. Finally, the City Manager's Proposed Budget includes $322K in ongoing funds for a parking lease at Cholla Library. Ongoing redevelopment of the former Metrocenter Mall has reduced parking options for library visitors. This funding will secure a dedicated parking lot for visitors, ensuring they can continue to enjoy the library's offerings.
Homeless Service Continuity - $18.4 million and 0.0 positions
During the pandemic, the City Council strategically deployed American Rescue Plan Act (ARPA) funding to address homelessness in the Phoenix area. As ARPA funding expires, and to ensure progress made in this critical area continues, the City Manager's Proposed Budget includes a total of $18.4 million in ongoing funds to continue key services. This includes $12.9 million to continue shelter operations, both at City-owned facilities such as the Phoenix Navigation Center, Safe Outdoor Space, and Washington Shelter, and through nonprofit partner facilities, such as Rio Fresco, North Mountain Healing Center, and the Central Arizona Shelter Services single adult shelter. Funding of $1.5 million will help continue summer heat relief efforts at the City's 24/7 heat respite sites and three extended hour cooling centers. Additionally, the City Manager's Proposed Budget allocates $1.5 million to support the Keys to Change Key Campus operations, including the Brian Garcia Welcome Center, janitorial services around the campus, and ensuring safe and secure storage of client personal property. Finally, $2.5 million is included for a master lease program. This program would enable the City to secure master leases for rental housing units, which include on-site support services, to sublease to individuals exiting homelessness to free up shelter bed space.
Housing Affordability - $6.6 million and 0.0 positions
The City Council established the Phoenix Housing Trust Fund in May 2025, and adopted the Housing Trust Policy in November 2025, to further the City's commitment to affordable housing. The proposed one-time $6.6 million increase to the Housing Trust Fund would bring its total available resources to $15 million, representing a significant investment in affordable housing. This funding includes $2 million designated for waivers or reductions on affordable housing and related project plan review, permit, and inspection fees, consistent with the Housing Trust Fund guidance adopted by the City Council in November 2025. It also includes $1 million designated for the creation of pre-approved housing plans focused on affordability and the character of the city's villages. Remaining funds would be deployed in accordance with the Housing Trust Policy, furthering affordable housing efforts in Phoenix.
Planning and Development Customer Service Enhancements - $1.5 million and 0.0 positions
The FY 2026-27 Trial Budget includes $1.5 million in one-time funds for customer service enhancements in the Planning and Development Department, focused on two key areas. First, the funding will support improvements to the customer service experience at Phoenix City Hall, including streamlined check-in processes, customer flow, and other potential enhancements to the visitor experience. Additionally, the funding will support continued customer service and process improvement initiatives, which may include website enhancements, additional educational efforts on available services and resources, and technology upgrades.
*NEW* Set-Aside for Labor - $50.0 million
Investing in employees to recruit and retain talent remains a top priority for the Mayor and City Council. The FY 2026-27 City Manager's Proposed Budget includes a $50.0 million set-aside based on finalized labor agreements and includes a mix of ongoing and one-time funds. The set-aside has been updated from $53.2 million in the Trial Budget based on specific negotiated increases in each year of the two-year agreements.
Set-Aside to Balance the FY 2027-28 Budget - $75.0 million
The FY 2026-27 City Manager's Proposed Budget includes a set-aside of $75.0 million to help ensure the FY 2027-28 budget remains balanced. This strategic use of one-time funds allows for the continuation of programs and services that residents rely on and helps ensure the GF budget is sustainable into the future.
Non-GF Budget Additions - 1.2 million and 8.0 positions
The City Manager's Proposed Budget also includes several Non-GF supplemental budget additions for the Aviation Department, totaling $1.2 million and 8.0 FTEs. These additions will support international airline operations, capital project management, computer technology upgrades, water quality monitoring, and administrative needs. Additional detail is provided in Attachment C.
GF and Non-GF Conversions to Maintain Services - $0 and 69.9 FTE
The City Manager's Proposed Budget includes 45.9 GF and 24.0 Non-GF new ongoing positions to provide critical and sometimes legally required support for City departments. These positions either represent conversions of existing temporary positions to ongoing status or are new ongoing positions funded at no additional cost. Funding for these positions has been identified and programmed in each respective department's operating budget. These positions are reflected in Attachments B and C.
FY 2026-27 City Manager's Budget
The proposed balanced FY 2026-27 GF budget is $2,290.9 million. This is a $97.3 million increase or 4.4 percent from the adopted FY 2025-26 GF Budget of $2,193.6 million. The increase is primarily due to increased compensation costs, which include the impact of negotiated labor increases, higher public safety pension costs, higher fringe benefit costs, and increases for contractual, commodity, and vehicle replacement costs.
Projected GF resources are estimated at $2,290.9 million and include the estimated beginning balance of $249.3 million, estimated revenue of $1,991.4 million and net interfund transfers and recoveries of $50.3 million, which include interfund transfers for central services, in-lieu property taxes, debt service, infrastructure repayment agreements, and resources to support the Public Safety Specialty Funds. GF revenues of $1,991.4 million represent annual growth of 3.5 percent over FY 2025-26. Revenue projections assume no further impact from the current legislative session and are based on the most recent data available to formulate projections. Schedule 2 included in this report provides more information about City revenue estimates for all funds and additional information can be found on the Budget and Research website at phoenix.gov/budget.
For all funds, which includes General, Enterprise and Special Revenue funds such as grants, and all debt service and pay-as-you-go capital costs, the proposed FY 2026-27 budget is $6,862.7 million. Details on the FY 2026-27 proposed budget for all City funds is attached to this report in Schedules 1-11 and include:
- Resources and expenditures by fund for FY 2024-25 actuals; FY 2025-26 estimate; and FY 2026-27 proposed budget.
- Proposed revenues for all City funds by major source.
- Proposed operating expenditures by department, including fund source.
- Proposed debt service by program, source of funds, and expense type.
- Proposed interfund transfers.
- Proposed full-time equivalent (FTE) positions by department.
- Preliminary FY 2026-27 Capital Improvement Program resources and expenditures by capital fund, program and fund source.
- Preliminary FY 2026-27 Capital Improvement Program by source of funds.
- Summary of proposed property tax levy and rate information.
Next Steps
The remaining key dates in this year's budget process include:
Date Event
May 19, 2026 City Council Budget Decision
June 3, 2026 FY 2026-27 Tentative Budget Ordinance Adoption
June 17, 2026 FY 2026-27 Funding Plan and Final Budget Ordinance Adoption
July 1, 2026 FY 2026-27 Property Tax Levy Ordinance Adoption
On July 1, 2026, City Council is scheduled to adopt the property tax as the final step in the legally required budget adoption process. Primary property tax revenues support operating costs for GF programs and services, while secondary property taxes pay debt service for capital projects for the General Obligation (GO) Bond Program. In November 2023, Phoenix voters approved the 2023 GO Bond Program, which includes 47 projects and provides the resources needed for new parks and libraries, police and fire stations, regional pools and splash pads, community centers, arts facility improvements, and street and storm drain projects. More information on the 2023 GO Bond Program can be found at phoenix.gov/bond.
The total combined primary and secondary property tax rate for FY 2026-27 of $2.0397 is lower than the FY 2025-26 combined rate of $2.0799. The proposed primary property tax rate for FY 2026-27 of $1.2652 is slightly lower than the FY 2025-26 primary rate of $1.2658. The proposed secondary property tax rate for FY 2026-27 of $0.7745 is lower than the FY 2025-26 secondary rate of $0.8141. Although the primary property tax rate is reduced, the primary property tax revenue estimate increases for 2026-27 to $233.4M, which is $10.7M or 4.8% more than the 2025-26 revenue estimate of $222.7M due to increased taxable net assessed valuations (property values) and new construction.
Additionally, state law requires a Truth in Taxation hearing notice to property owners, which requires notification any time the average primary property tax bill increases, even if the tax rate is not increased. The law does not require notice on the City’s secondary property tax. The hearing is scheduled to take place at the City Council Formal meeting on June 17, 2026.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher and the Budget and Research Department.