How Are City Services Paid For and
Who Decides How Much To Pay?
The city has an operating budget of almost 2.4 billion dollars (that’s $2,447,899,000). A budget is a way to organize and keep track
of the money the city will spend in a year. A budget is like an allowance; if your parents give you $10 per week, you can only spend
$10 in one week. By law, the city must have a balanced budget; therefore the city can only spend as much money as it has.
The operating budget has two kinds of funds - general purpose funds and enterprise funds. Enterprise operations, such as water and
wastewater, development services, the airport and garbage collection, pay for themselves because citizens who use the services pay a
direct fee. So, these operations don’t require taxpayer funds from the general purpose part of the budget.
Where do general purpose funds come from? Take a look at this pie chart. You pay local and state sales tax when you buy something
in a store - like a CD or sneakers. That’s why a 99-cent hamburger costs $1.07. A small percentage of the cost of the item is paid to
the city. People who own homes and businesses pay a property tax to the county each year. State-shared revenues are funds given to the
city from taxes collected by the state for certain programs. User fees are collected for some city services; for example, a builder pays
a permit fee to build a new restaurant or people pay to use city pools or golf courses. In other words, only people who use these services
pay for them.
General purpose funds pay for basic city services. Most of the money is
allocated for police and fire protection and to maintain streets, parks and
libraries. General purpose funds also pay for recreation programs, human services
and neighborhood services.
Pie Chart Related to General Funds Spending
When new buildings, park facilities or fire stations are involved, the city needs to raise extra money. Rather than ask the citizens to
pay a large tax for a construction project, the city sells a bond. When the city sells a bond, it is actually borrowing money and selling
a written promise to pay back the lender within a certain amount of time. That way, the citizens pay a smaller tax over a longer amount
of time, and still get the new facility they need. Cities receive a bond rating that will determine how much money they will be able to
borrow; Phoenix has an A+ bond rating, which means lenders are confident that the city will pay back the loan. Some of the money in the
operating budget goes to debt service, which means it goes to pay back the loans a little bit at a time.
Because citizens’ taxes pay for most city services, citizens have a chance to give their opinions about how the money is spent during the
budget process. The budget process begins in October when each city department decides how much money it will need in the coming year.
In November and December, the city’s Budget and Research Department comes up with a suggested budget. In January, City Council members
review the suggested budget with department directors, asking them questions and making some decisions about which programs and services
are important. The city manager gets a chance to work on the budget, and in May another suggested budget is presented to the council for
approval.
The city conducts public meetings where citizens can review the suggested budget, ask questions and make suggestions. This process
includes a budget forum specifically for youth. A newspaper, printed in English and Spanish about the budget, explains how much money
will be spent on each service the city provides. After the council hears the opinions of the citizens and the city manager, the members
vote on the budget. The city’s budget year is different from a school year; the new budget is good from July 1 until June 30 the next
year.
