As we conclude budget approval for Fiscal Year 2024, which begins on July 1, questions arise about the City’s tax structure, and how we are funded. Many are surprised to learn that transaction privilege tax (TPT or sales tax) is the primary source of revenue for the City’s General fund, which pays for public safety and other critical City services. Property tax in Prescott accounts for less than 4% of revenue for the General Fund.
As growth continues in and around Prescott’s city limits, the low City property tax plays a minor but important role in funding our public safety and other critical services. The Prescott property tax rate is much lower than the rate in the unincorporated County areas. For this reason, growth and increased property values disproportionately benefits the County, with their higher property tax rate. However, the growth in the north Prescott area, both in the City and County areas, is stretching City public safety services capability and response times.
This means that the police, fire and emergency medical services are funded from the City’s general fund with a vastly lower property tax rate. Currently, for example, a property with a $400,000 assessed value outside of the City limits located in the Central Arizona Fire and Medical Authority’s district, pays an additional $1,043 annually above the same valued property in the City of Prescott.
As Council moves to approve the Fiscal Year 24 budget, for the first time since 2017, we are considering an increase in the property tax levy by the maximum allowed 2%. This increase will trigger a Truth in Taxation process, which will include public notices and public hearings. What does this increase mean for Prescott homeowners? About $13.04 for a similar $400,000 property. While not a significant sum, the additional revenue will help the City keep up with the need for more police and firefighters. Property Tax is a more consistent funding source while sales tax is subject to the cycles of the economy and tourism variations. Police and fire protection is a constant need and requires a more stable funding source. The question of property tax and its role in funding critical City services must be considered, as a way to provide a more balanced source of revenue to meet the needs of our growing community.
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