What Happens When a Large City Doesn’t Have a Property Tax But Attempts to Enact One

Mesa, a city with a population of approximately 450,000, is the largest city in the United States without a property tax. It has also grown very rapidly in the last 25 years, although now its growth rate is moderating. In 1945, Mesa eliminated the property tax and began to depend heavily on revenues from public utilities to maintain its budget. The growth rate of Mesa’s revenue has been very slow and, Mesa has responded by cutting operating and capital expenditures. The paper identifies ten, often interdependent reasons, why the budget problems are peaking in this year and then analyzes Mesa’s responses to these problems. Mesa’s responses included proposing an increase in the local sales tax and establishing a new property tax. In addition, the City advanced a series of expenditure reductions in specific programmatic areas. In its May 2006 election, Mesa voters accepted the sales tax increase and rejected the new property tax. In response, Mesa cut expenditures and eliminated a substantial number of personnel positions.