Tempe seeks voters' OK for sales tax hike to fund services

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(The Center Square) - Tempe is asking its residents to boost the Arizona city's revenues by $50 million through a sales tax increase.

On Nov. 3, voters will decide whether to raise the Arizona city’s sales tax from 1.8% to 2.3%, starting Jan. 1.

Of the 0.5 percentage point increase, 0.3% would go toward public safety and security, 0.1% toward transportation and 0.1% toward early childhood care and preschool programs.

The increased sales tax would not apply to food for home consumption.

Thomas Duensing, chair of the Tempe Forward Political Action Committee, said if Tempe residents fail to pass the proposition, the city of about 200,000 people could reduce services such as transportation and experience slower first-responder response times.

He told The Center Square that the minimized services would harm Tempe’s “most vulnerable” population.  

According to Duensing, Tempe currently has a hiring freeze because of its financial situation.

He said the state Legislature's 2023 passage of Senate Bill 1131 impacted Tempe by eliminating the residential rental taxes statewide. He noted the bill caused Tempe to lose between $25 million and $26 million in annual revenue.

SB 1131 went into effect in January 2025.

He said the bill affected Tempe significantly because the city is home to Arizona State University, one of America’s largest universities. He noted Tempe is a “rental community.”

Tempe expects to gain $50 million in additional annual tax revenue if residents approve the proposition, Duensing explained.

Duensing said 66% of sales tax revenue would come from non-Tempe residents who come to the city for work or attend ASU. He added that a 0.5% sales tax increase is 50 cents per $100.

State Sen. Mitzi Epstein, D-Chandler, who co-chairs Tempe Coalition for Tax Fairness, called Tempe’s proposal a “regressive tax.”

It's the wrong time for a sales tax increase because of the cost of living, Epstein told The Center Square. “Prices are too high. That’s the problem. What will this do? This will increase prices."

Tempe has over $100 million in cash reserves that could fund services without raising the sales tax, Epstein said.

Even though the proposal doesn’t affect food for home consumption, many people eat takeout for dinner, and that takeout will be taxed, Epstein said. She noted the sales tax would also apply to people buying tangible goods.

The sales tax increase would affect low-income city residents because they “will end up paying far more than their fair share,” Epstein said.  

According to Epstein, the tax increase would be a “large, permanent increase in sales tax, which is an unfair form of taxation.”

Epstein said Tempe taxpayers “should be concerned about how the money is going to be used,” adding that she has worries about how Tempe will spend the extra revenue.

Robin Arredondo-Savage, CEO of the Tempe Chamber of Commerce, said the chamber supports the proposition because public safety services are at stake.

Businesses told the chamber that the proposed sales tax increase's benefits outweighed the consequences of the proposition failing, the chamber CEO said.

Arredondo-Savage, who served 12 years on the Tempe City Council, told The Center Square that it's important for the city to have the funds to maintain and improve its services.

City residents should make sure Tempe spends the money as promised, Arredondo-Savage said. “It’s important [residents] continue to make sure everything aligns, and those promises that were made are kept."

Duensing said it is not a “valid concern” for people to worry that Tempe is going to waste the additional tax revenue, citing the city’s AAA bond rating, a measure of creditworthiness and financial strength.