Phoenix studying future of food tax

It's been a little more than a year since Phoenix's emergency food tax went into effect, and city officials are thinking twice about whether to repeal the measure.

Some elected officials and members of the public have called on the city to repeal the 2 percent tax on food, claiming the money collected has been used to pay for employee raises and bonuses instead keeping certain services and programs running. The tax went into effect in April 2010.

Phoenix Mayor Phil Gordon decided Monday that the City Council will review the food tax in September, and he announced that he is creating a task force to develop recommendations as to its fate.

On Friday, Councilman Sal DiCiccio proposed shortening the life of the food tax from five years to three years at the council's policy meeting set for today. But Gordon said the issue is too complex for such short notice.

"While I understand your preference would be that we vote to amend the temporary food tax (Tuesday), I am especially mindful of past criticism that this issue is too complex to be explored fully, debated and voted on 'within just 24 hours,' " Gordon wrote in a memo to DiCiccio on Monday.

The 2 percent tax on food has been controversial since its approval, with many City Council members - including DiCiccio - and residents calling into question why the public was given only 24 hours' notice before it was voted on and approved in February 2010. DiCiccio and Council members Bill Gates and Peggy Neely, who recently resigned to run for mayor, voted against the tax.

Gordon has asked City Manager David Cavazos to document where the money from the food tax has gone so that the task force can decide whether it should continue.

"We'll be working on this issue with every stakeholder group to determine who has interest in it with the objective of making this the most open and transparent process in Phoenix history," Gordon said.

The food tax, estimated to generate $50 million in annual revenue for the city, was proposed as the city faced general-fund budget shortfall of more than $270 million for the 2010-11 fiscal year.

An estimated $30 million of the food-tax revenue is funneled to the city's general fund while the rest goes to special voter-approved funds that pay for public safety, transit, and parks and preserves.

So far this fiscal year, Phoenix has collected about $42.5 million from the food tax, with nearly $25.5 million going to the general fund, which pays for libraries, senior centers and other major daily operations.

Surprise and Mesa are the only Valley cities without a food tax.

Last year, Phoenix officials said the food tax would save 117 sworn police and 62 sworn fire jobs.

Phoenix management also said the city would have had to shutter five community centers, five senior centers and three libraries and reduce other programs and services without the food tax.

But DiCiccio and others have questioned whether it was necessary to impose the food tax on the public when the city approved $28.9 million in promotional pay raises and longevity bonuses to city employees for the current and coming fiscal years.

"If there was no food tax, there would be no pay raises," DiCiccio said. "It's as simple as that."

Critics of the raises and bonuses have said the city should have been more open in disclosing them during a series of public budget forums held throughout Phoenix this year and last.

City officials have said it was made known to the council in 2010, when the city faced more severe cuts to balance its budget, and that the raises and longevity bonuses would be part of the budget for the 2011-12 fiscal year.

DiCiccio said while he'd like for the food tax to be repealed altogether, he tried to offer a compromise by proposing the tax sunset in 2013 instead of 2015 as scheduled.

Gordon, however, insists that the food tax is necessary to keep city services from being eliminated and that the pay raises and longevity bonuses have been offset by 3.2 percent pay cuts employees agreed to, saving Phoenix $104 million over two years.

"Let's put it out there in front of everyone, give everyone time to know about it, and let's review everything," Gordon said.

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