The Cottonwood City Council adopted a fiscal year 2025-26 tentative budget and expenditure limitation of $172,885,373, on Tuesday, June 17, a 23% increase from FY 2024-25.
In early spring, the council held a retreat and created a strategic plan that outlined the city’s goals. Financial Services Director Kirsten Lennon presented the proposed budget and information regarding staffing, capital and operational costs.
Lennon repeated to council on May 13 that the city typically spends only half its budget, which in FY24 was $62 million out of a $154 million expenditure limitation. By state law, municipalities cannot spend more in a fiscal year than the expenditure limitation, so Cottonwood and other Arizona municipalities set a high expenditure limitation to allow the city room to incur future expenses should grants and funding be secured during the fiscal year.
The majority of the city’s funding comes from the Transaction Privilege Tax, the de facto city’s sales tax, which is set at 3.5%. The budget projects that retail is expected to account for 54% of TPT revenue, grocery tax for 18% and restaurants and bars for 10%.
The city also receives revenue from user fees for things like water, wastewater, fines and service charges. State shared revenues are another main source for the General Fund and the Highway User Revenue Fund, but the latter can only be used for street-related projects and construction.
The budget projects that the majority of the city’s expenses will be personnel costs, with capital projects as the second-largest category. Lennon said that the budget will add four full-time employee positions, bringing the city’s total to 248. The budget will also include a 2.5% cost of living adjustment for city staff, effective Tuesday, July 1, the start of the new fiscal year.
The budget will include an interfund transfer of approximately $10 million from the General Fund to the HURF to cover cost increases on the Main Street Improvement Project. The capital budget also includes purchasing a fire truck for the Cottonwood Fire Department and completing a riverwalk trail.
The budget also includes a reserve of $1 million for affordable housing projects, so funds are available to put towards affordable housing projects that come along during the year that haven’t previously been budgeted for.
Following council discussion of the proposed budget in May, minor changes were made that did not affect the total expenditure limitation.
No members of the public commented on the budget. The council unanimously approved the tentative budget, which will be brought back in July for final adoption.
