City leaders hope a pair of major annexations will help solve the revenue side of their budget problem.
But success depends on them quickly working out complex agreements to take in areas that have resisted annexation previously.
Areas the city is eying are the remainder of the southeast side University of Arizona Science & Technology Park and the north side auto mall — portions of which were both taken into the city previously.
Bringing them into the city limits would ring up an estimated $2.1 million in new tax revenue for the city, said budget director Joyce Garland.
All state sales taxes and income taxes paid by Tucsonans go to the state and then are shared with cities based on the population in the incorporated area.
So Tucson needs to make sure more of the taxes paid here come back to the city to pay for services here, said Mayor Jonathan Rothschild.
That’s why he is making annexations a priority and asking for more resources to be committed to the process, he said.
The city completed seven annexations last year, and Rothschild wants to see that number grow each year. While $2.1 million may not seem like a lot relative to the city’s $1 billion budget, every dollar is important, he said.
“It’s not revenue for revenue’s sake,” he said. “It’s revenue for services, for our citizens’ sake.”
The city tried last year to annex the part of the auto mall area that lies outside its boundary, which includes the Larry H. Miller Fiat and Volkswagen dealerships, Volvo of Tucson, BMW of Tucson and Jim Click Kia.
That effort failed when a major property owner, Hughes Federal Credit Union, balked.
The city will try again, this time with a map that excludes the credit union property, said Chris Kaselemis, economic initiatives program director.
The annexation process includes making the map public, holding hearings and gathering enough signatures to represent buy-in from both a majority of the individual property owners and the owners of the majority of the property value.
The new map will require more work because it will take more signatures, Rothschild said.
But he said the sales pitch is a good one.
The cost of fire service for those properties would be cut in half if the owners agree to the annexation, he said, because the city property tax for all services is less than the area fire district charges.
And, he said auto dealers have asked for a level playing field for sales tax, where the lost competitive advantage of not charging car buyers city sales tax is offset by the property tax savings and improved public services.
The process will have to move quickly, because the estimated $1.5 million in sales tax revenue from auto sales already is included in the city’s draft budget for next fiscal year.
On the other side of town, at the 1,345-acre tech park, the land and the buildings are state property and aren’t taxed, but the tenants pay use taxes and sales taxes.
The western half of the park, west of Rita Road, already is in city limits.
The city estimates it could capture another $600,000 in tax revenue from the rest of the park if it were in the city.
Tech park tenants have requested annexation because they want upgraded fire and water services, Rothschild said.
The annexation of the western part of the park included a commitment from the park to improve roadways, donate land for a fire station and build out a water system, said Bruce Wright, UA associate vice president.
The city’s part of the deal was to help with development, and a request for qualifications for developers is coming next month, Wright said.
The park is in “active conversation” with the city about what the terms of a new pre-annexation agreement may be, he said.
The tech park might benefit if the city offers tax incentive packages that could help seal the deal on new employers who want to locate at the park, he said.
Some of the new tax revenue could also be spent on the business incubator at the park, Wright said.