Municipal Fiscal Structures and Land-Based Growth in the Phoenix Metropolitan Area

This case study examines municipal fiscal structures in the Phoenix metropolitan area, with a focus on Scottsdale, Chandler, and Fountain Hills. It explores implications of the quest for sales tax revenues in a context of rapid, land-based growth, and considers fiscal pressures faced by municipalities as they approach build-out, with land becoming less available. After documenting heavy reliance on sales taxes relative to property taxes, it provides data on sales taxes on construction activity and identifies approximate build-out dates. It suggests the idea of a fiscal life cycle, particularly in relation to infrastructure investment. It examines strategies pursued by municipalities approaching build-out, including efforts to increase retail sales tax revenues, and discusses legislative efforts to limit municipal incentives to attract retail facilities. It then discusses specific financial, planning, and other policies adopted by municipalities and highlights forward-looking policies on both the revenue and expenditure sides of the budget: limiting the use of one-time revenues for ongoing operating expenses, and addressing the problem of rising land prices by acquiring land and protecting rights of way in advance of need. Finally, it considers state-level policies to assist municipalities experiencing fiscal pressure as they approach build-out.