Food tax survives city council, Legislature

It does not appear likely that Chandler residents will get a tax break at the supermarket – at least from the city.

Two separate attempts that would have either cut, or eliminated the 1.5% tax ran into roadblocks last month.

Chandler Councilman Mark Stewart proposed either cutting, or eliminating the tax at the Feb. 23 meeting. His proposal died when no other member was willing to support it.

“I want to recognize the inflationary challenges we face and the hardship that’s been created,” Stewart said in making his plea. “For many in our city’s inflation is not slowing down, as we’ve noticed with the January report (currently at 9.5%).

“That’s why I want to have a discussion with you, and with the community, about a proposal to suspend our grocery tax. It’s 1.5% on all non-prepared foods, and I’d like for that to go into effect as early as April 15, but I would settle for July 1, which is the beginning of our next fiscal year.”

Instead, Council member Christine Ellis offered up her own motion, essentially delaying a decision until later in the budget process. That is what would have happened anyway if neither had made a motion.

The second attempt to end the grocery tax is coming from the state Legislature. The Arizona State Senate passed a repeal of the tax on Feb. 27. However, it does not appear likely that Governor Katie Hobbs would allow the tax cut to go through. Last week she vetoed a similar tax on rental properties.

Gov. Katie Hobbs prior to this newspaper’s print deadline refused to say whether she will approve the Republican legislation to eliminate the ability of cities to tax groceries and save affected Arizonans more than $161 million a year.

Arizona lawmakers eliminated the state sales tax on such purchases in 1980. But they left intact the ability of cities and towns to continue to do so to raise local revenues.

“I continue to be concerned about the impact on cities and especially public safety budgets.’’

Data prepared by the League of Arizona Cities and Towns show that the effects on those communities that continue to impose the levy would vary.

The question of whether there really will be lost revenues is less than clear.

Even Nick Ponder, a lobbyist for the League, told a legislative panel that approval of SB 1063 won’t necessarily reduce the overall tax burden. He said that cities, having to finance operations, are likely just to increase taxes elsewhere, including possibly hiking the local sales tax rate on everything else.

That sentiment was echoed by Sen. Mitzi Epstein, D-Tempe, when the Senate voted to eliminate the tax.

“If you take away this tax, it’ll probably be an increase in property tax or some other increase in their sales tax rate,’’ she said, calling it “playing whack-a-mole’’ with local taxes. Epstein’s district includes northern and western Chandler.

“When we change one tax that our cities are allowed to do, we’re just whacking the mole,’’ said Epstein whose home town has a 1.8% tax on groceries which raises more than $10 million a year. “It’s just going to pop up and become another tax, another place.’’

But Sen. John Kavanagh, R-Fountain Hills, had a different take on the measure.

“This is not a whack-a-mole bill,’’ he said. “This is a bill that whacks the tax that whacks poor people.’’

Hobbs, in discussing the bill to block cities from collecting the food tax, said Tuesday she doesn’t want a “piece-meal approach’’ to providing relief to the poor.

“I think there’s a lot of other things I think we could be doing to make things affordable,’’ she said.

Yet the governor continues to push a measure that would eliminate state sales taxes on diapers and feminine hygiene products, something that would save customers -- and reduce state revenues -- $40 million a year. She said singling out those items is different.

“It’s something that has some impact for some folks,’’ she said. At the same time, Hobbs said it really doesn’t cut local revenues other than the share of state sales taxes they receive.

Chandler officials have said they were concerned the Legislature would pass both the food and rent tax cuts, which would have meant up to $25 million cut to the general fund.

Stewart said the city has too much money, and it’s time to give some of it back to its residents.

“The state threatens to undermine our local control because other cities don’t watch the money like we do,” Stewart said. “The reality is that each city is different.

“We have a $10 million emergency fund, right? We have a $38 million contingency fund. These dollars are not marked for anything, so $48 million right there. When I started on council, that contingency budget was about $24 million. Now it’s $38. We could lower that by 3% and that would take us to $26.6 million.”

Stewart said the city is well run, adding services, and can afford to give back some of the money it collects.

“We’re building ballparks, we’re adding more policemen,” he said. “We’re adding fire stations, we’re investing in infrastructure. … We are killing it. … So that brings me to the cost of this proposal. Suspension of the entire 1.5% would cost the city about $14 million.”

Council is in the middle of its budget planning for the next fiscal year. It has already had one overview meeting in the fall, and its first budget workshop last month.

The second budget workshop is scheduled for March 23, followed by an all-day budget briefing on April 28. The Council is scheduled to adopt the budget on June 15. It is scheduled to consider tax levy for the next fiscal year on June 29.

“Where else can we figure out something to be able to help others and alleviate some of the concerns that [Stewart] had concerning the … inflation?” Ellis said.

She suggested waiting until staff had a chance to get updated budget numbers and look for recommendations on how best to help residents.

She expressed concerns that suspending the grocery tax, and then voting on keeping it suspended, or bringing it back each year was not as easy to do as Stewart suggested.

“Valid points,” Stewart said. “And I think tabling this discussion … or the vote on the ordinance for a later date is great.”

Howard Fischer of Capitol Media Services contributed to this report.