TITLE
Public Hearing. An Ordinance of the City of Maricopa, Arizona, adopting the document filed with the City Clerk entitled "The 2025 Amendments to the Tax Code of the City of Maricopa" to amend the City Tax Code to increase the general transaction privilege tax rate by one-half percent (.5%); excluding the tax classes of hotels, hotels/motels: additional transient lodging and retail sales: food for home consumption from the general rate increase; providing for severability; and designating an effective date of October 1, 2025 for a period not to exceed twenty (20) years. Discussion and Action.
AGENDA ITEM DESCRIPTION
Maricopa Road was originally created in about 1930, as a one lane road between Phoenix and the Maricopa Wells area surrounding the Union Pacific Railroad. In 1990, Maricopa Road was widened to two lanes in each direction, through a new state funding tool called a Roads Improvement District. It was also added to the state highway system at that time, with the designation as State Route 347.
Since those two lanes in each direction were paved in the early 1990s, and since the State added Maricopa Road to its state highway system, no capacity has been added to State Route 347 despite the fact that over 75,000 additional residents now rely upon the route as a daily commuter corridor to the Phoenix Metropolitan Area.
The citizens, developers, staff, and elected officials in Maricopa have sought expansion of the roadway for many years. The steps to seek widening of this important Route have been extensive and persistent, with particular focus over the last few years. Some of these steps include:
1. Regular attendance at monthly State Transportation Board Meetings.
2. Removing the burden of ongoing maintenance of State Routes within the City limits.
3. Taking on projects that would have otherwise fallen to the responsibility of the State (such as Smith-Enke/John Wayne Parkway intersection improvements, John Wayne Parkway widening, and State Route 238 widening). These have saved the department over $35 million dollars that would have otherwise been required to be invested in Maricopa roadways.
4. Meetings with ADOT Director and Staff.
5. One-on-one meetings with State Transportation Board Members.
6. Completing a Road Safety Analysis, showing that SR347 is one of most dangerous roadways in the state, with a high concentration of deadly or serious accidents.
7. Receiving numerous legislative appropriations, including for the Riggs Road overpass, and intersection improvements at Casa Blanca and Mammoth Way (Cement Plant Access).
8. Ensuring funding for the Interchange of Queen Creek Road/SR347 and Interstate 10 was included in the widening of Interstate 10.
9. Scheduling the funding of the Maricopa County portion of widening, through Proposition 479, which charges a half-cent on all transactions in Maricopa County to fund roadway improvements. Staff has continued working with MAG to prepare this project for advancement within the phasing plan, once the Pinal County portion is funded.
10. Working with Pinal County to obtain commitments for additional local contributions that could help pay for the improvements on SR347.
The City is now seeking a consistent funding stream to improve commuting corridors surrounding Maricopa. With rapidly escalating transportation costs, and momentum with lobbying the project at the state and federal levels, it is critical that these funds are available as quickly as possible. As such, Staff recommends the City Council pass an ordinance to increase the sales tax by 0.5% to fund improved commuting corridors (the authority to tax is found in the Arizona Constitution, in Article 9, Section 6). Because of state consolidated election laws, the tax can be implemented about 18 months quicker if approved by ordinance than it could be if the matter were referred to Maricopa voters. The next possible election date for the matter would be in November 2026 (with a tax implementation date of April 1st, 2027). If this ordinance is approved by the City Council, the tax could be implemented on October 1st, 2025. This 18-month difference will result in a cost savings for the project, will continue the project momentum at the state level, will enhance economic development in the community, and will result in less loss of life, fewer accidents, and faster relief for the congestion on this critical route.
Other communities have done similarly to fund transportation projects. In fact, many cities and counties already have a component of their sales tax rates that goes to transportation. Others have increased taxes on their residents and businesses, in the following ways:
• The Apache Junction City Council recently reauthorized a 0.2% sales tax for another ten years. This has been a long-standing process in Apache Junction, with City Councils reviewing (and subsequently renewing) the tax every ten years.
• Phoenix increased their tax rate twice to fund transportation projects, once in 2000 (0.4%) and again in 2016 (0.3%), for a total of 0.7%.
• Additionally, Maricopa County charges 0.5% for transportation projects (including State highways like the 101, 202, 303, but also for improvingUS-60, and the interstates). This was recently approved by voters as Proposition 479.
• In 2007, the Queen Creek Town Council implemented an additional 0.25% sales tax specifically in the Town Center to help cover the costs associated with constructing Ellsworth Loop Road. This road was a key infrastructure project designed to boost economic development by improving traffic flow and creating a thriving commercial hub while preserving the original Ellsworth Road. Now that the debt related to the Ellsworth Loop construction has been fulfilled, the Town of Queen Creek has eliminated the additional tax.
• In 2022, Casa Grande voters approved $75 million in bonds for transportation projects. At the same time, those same voters rejected similar measures to issue bonds to fund public safety, parks and recreation, and city facilities. These bonds increased secondary property taxes for all Casa Grande residents and businesses.
Maricopa residents have strongly supported transportation initiatives in the recent past. In 2017, nearly 59% of Maricopa voters approved Proposition 417, which increased the County sales tax by 0.5% to fund countywide transportation priorities. This included only $28.8 million for widening State Route 347. This tax was later overturned by the Arizona Supreme Court, and no dollars were spent on transportation projects. These dollars have regrettably been sent back to businesses, due to the decision of the Supreme Court. In 2022, nearly 63% of Maricopa voters approved Proposition 469, despite this tax only dedicating $12 million of improvements to State Route 347. The Proposition did not pass countywide and was never collected. In November 2024, Maricopa voters overwhelmingly supported a countywide tax for the maintenance and improvement of roads throughout Pinal County. Although more than 75% of Maricopa residents supported this Proposition, these funds are not eligible to be spent on widening State Route 347 north of the City limits, and are largely used for the day-to-day maintenance of our existing roadway network.
When looking at Pinal County jurisdictions and others high-growth communities in the Phoenix area, Maricopa’s sales tax rate would remain competitive under the new proposal. Currently, only eight cities in Arizona charge a lower sales tax rate than the City of Maricopa. Many of these cities are well-established, and do not have the same growth demands that face Maricopa. Overall, the median sales tax rate in the state is 2.95%, and if the City Council were to approve this increase, Maricopa would still fall significantly below this median rate (at the proposed rate of 2.5%).
The 0.5% increase in the sales tax rate would apply to various subcategories of taxable activities but is not an increase within every category. For example, the increase would not affect groceries (“food for home consumption”), gasoline, or residential rental taxes (which were eliminated as of January 2025).
Citizens of Maricopa (and Arizona Growing Smarter legislation) have long insisted that ‘growth pay for growth.’ While developers pay a Development Impact Fee for each new unit they construct in Maricopa, they are also required to pay sales taxes on the materials that are used for construction. In an average month, construction sales tax makes up about 40% of the total sales tax collected in Maricopa, which means that a significant portion of the tax to improve commuting corridors would be paid by growth.
The City has always maintained operations and enhanced services while trying to minimize the impact to taxpayers. Since the City first passed a sales tax ordinance over twenty years ago, it has never adjusted its sales tax rate. Over the course of this same time, the city’s population has increased 70 times, its area has nearly doubled (from 29 to 43 square miles), the total amount of lane miles that we maintain has almost quadrupled (from 149 to 587), and calls for emergency service have gone from 18,000 to nearly 75,000 annual calls. At this same time, the total employees per 1,000 residents has decreased significantly (from 10.6 to 7.3). Paired with the proposed decrease in primary and secondary property tax rates in the Fiscal Year 2025-2026 budget, these all show the City’s continued commitment to the efficient use of taxpayer resources.
Creating a local sales tax to improve commuting corridors gives control to Maricopa and its taxpayers to determine how best to spend the dollars collected by the tax. Expenses will be programmed through the annual Capital Improvement Plan and over the course of the tax, Staff will provide annual reports showing the transfer of the appropriate proportion of sales tax collections to a dedicated fund for improving commuter corridors. These annual reports may be included in the Annual Comprehensive Financial Report, Popular Annual Financial Report, or similar postings to the City’s website.
As described in the ordinance, this sales tax surcharge will expire in twenty years. Nothing precludes future City Councils from re-assessing the transportation funding situation at that respective time and amending this rate prior to the twenty-year expiration date.
Given ADOT's extreme funding gap (estimated at $231.4 BILLION of highway capital needs to 2040, with only $69.1B of available funding), it is unlikely that the widening of State Route 347 would occur without a local contribution. The project is currently ranked ninth on the priority list of projects statewide, has not been included on the Five-Year Transportation Plan, and has no current timeline. Under ADOT's policies, "Higher funding participation by local governments and/or developers will generally improve the possibility of adding projects to the Five-Year Transportation Facilities Construction Program."
A subsequent agenda item addresses the Intergovernmental Agreement with the Arizona Department of Transportation. Once signed, this would ensure the project moves forward to construction.
PRESENTER
This item will be presented by Benjamin Bitter, City Manager.
STAFF RECOMMENDATION
Staff recommends the Mayor and City Council approve the ordinance, with the new sales tax rates proposed to be effective October 1st, 2025. Discussion and Action.