For decades, Oro Valley’s municipal finances rode the high of booming construction and rapid population growth. Now, the town is trying to sober up.
The town’s council voted 4-3 in favor of one new tax on Wednesday while rejecting two others. Several officials argued the new taxes were needed to respond to declining revenues, especially from construction taxes. But the town’s business chamber and several council members disagreed, arguing for pro-growth policies or citing a fundamental opposition to raising taxes.
“The town has historically been reliant upon growth-related taxes and revenues. As the town has approached buildout, those revenues have not produced at historical norms,” chief financial officer David Gephart said at the meeting.
The council approved a 2.5% use tax on untaxed large purchases made outside the town by residents. It rejected 2.5% taxes on telecommunications providers and landlords of commercial property like stores and offices. Most Tucson-area cities and towns already have all three taxes in place.
Town staff estimated that the use tax will bring in between $375,000 and $600,000 in new annual revenue.
Councilwoman Mary Murphy opposed all taxes, arguing that the town should first audit its own government for efficiency.
“I think there is time before this becomes a crisis,” said councilwoman Melanie Barrett about her vote against all taxes.
After decades of growth, new construction is no longer a reliable source of income for Oro Valley##
Mayor Joe Winfield voted in favor of all three taxes. In an interview, he said Oro Valley is contending with many of the same forces affecting municipal budgets across Arizona: lagging sales tax revenue due to economic uncertainty, long-term declines in shared revenue from the state and falling income from gas taxes due to electric vehicle adoption.
But he said Oro Valley also faces a historical trend of its own. The town, after decades of rapid population growth and housing construction since its creation in 1974, is running out of land to develop. That means less revenue from the town’s 4% tax on construction-related purchases and from new residents spending money in town.
“I don’t believe that the town is in crisis. I believe that this is forward-looking governance,” Winfield said about the proposed taxes during the council’s meeting.
According to Oro Valley’s financial reports, construction tax revenues between June 2024 and June 2025 were down 30% since the previous year and at their lowest point since 2016. According to town staff, actual construction tax income has fallen short of projections since at least June 2024.
The town’s 2025-2026 budget projected further declines in overall tax revenues due to “declining residential development.” The Arizona Office of Economic Opportunity projects Oro Valley’s population to stop growing around 2040.
Meanwhile, road maintenance costs have grown and the town lacks funding to make necessary renovations to a recently-purchased building meant to house the town’s police, according to staff.
Though the town could annex more land to develop, Winfield said the process can be time-consuming and controversial. Even if land were available, home construction is low across the country as interest rates, material costs and labor shortages strain developers.
Local business chamber opposed taxes, arguing city is not prioritizing growth##
All tax increases were opposed by the Greater Oro Valley Chamber of Commerce, an association of local businesses. The chamber compared the taxes to another question on the council’s Wednesday agenda — how to develop a vacant plot of land at Oracle Road and Pusch View Lane — to make a larger argument about municipal revenues.
“One (taxes) is about squeezing more out of what already exists. The other (zoning) is about whether we give our town the chance to grow the tax base in the first place,” the chamber wrote in a statement.
Speaking about the zoning measure, chamber president Kristen Sharp urged the council to allow big-box stores on the parcel. She said other options would “make attracting serious investment difficult.”
The council did not choose Sharp’s preferred option. Separately, Winfield said he believes public opinion in Oro Valley is against growing “vertically” — with denser, taller residential and commercial buildings — as other fully built-out Arizona communities, like Tempe, have done.
