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After months of meetings filled with presentations from various departments, the Coconino County Board of Supervisors has adopted its fiscal year 2025 budget.

Down nearly $62 million from the fiscal year 2024 budget of $546,374,685, the 2025 budget of $484,503,861 goes into effect on July 1 and includes a continued focus on the county’s capital improvement projects, facilities upgrades and flood mitigation efforts while serving as a cautionary strategy against possible fluctuations in revenue due to the economy.

Coconino County Chief Financial Officer Siri Mullaney also provided details as to why the budget decreased from 2024’s total, listing reasons such as some major flood control and road projects being completed, as well as the “tapering off� of federal money such as the American Rescue Plan Act (ARPA) and the Local Assistance Tribal Consistency Fund.

As part of the June 25 budget meeting, the board also hosted Truth in Taxation public hearings for the primary tax rate, the Coconino County Flood Control District secondary tax rate, the Coconino County Public Health Services District secondary tax rate and the Coconino County Library District secondary tax rate. All four rates were approved unanimously by the five supervisors, but will be formally adopted at the board’s next meeting on Aug. 13 following the summer break.

Tax rate changes

With a few members of the public joining the meeting virtually to inquire about rising tax bills, Mullaney noted that much of Coconino County’s increase in tax revenue was primarily a function of the increase in property valuation rather than an increase to the tax rates themselves.

Opening the presentation with details regarding the county’s primary property tax levy, Mullaney revealed that the rate is actually dropping from $0.5009/$100 of assessed value to $0.4944/$100 of assessed value in order to comply with Arizona’s cap on a county’s primary property tax increase.

“County revenue from primary property tax can only increase by 2%, and, as noted, property values in Coconino County have increased and they’ve increased at a rate slightly greater than 2%,� Mullaney said. “This does represent a 2% inflationary increase in the taxes levied for our primary property taxes, but it’s 2%. That impact is 97 cents for every $100,000 of value.�

While the county will continue to see an increase in tax revenue from the primary property tax levy, staff continued to stress the primary rate was not being increased and that Coconino County continues to rank much lower than the rest of the state in its tax rate.

“We have the lowest primary property tax rate in the State of Arizona,� Mullaney said. “Again, as noted, that rate is continuing to go down due to the way the formula works with valuation.�

Similarly, the secondary property tax rates for the Flood Control District and the Public Health Services District remain at the same rate as 2024 but will generate additional revenue due to the increase in assessed property values.

“This is how we basically have an inflationary impact on our revenues every year, through having the property values increase,� Mullaney explained, adding that the taxable value can’t increase by more than 5% unless there is a change to the property such as new construction.

The Flood Control District levy comes in at $0.50/$100 of assessed value for 2025, with an average increase of $2.04 per $100,000 of value from 2024. The Public Health Services District levy remains at $0.25/$100 of assessed value from 2024, but the average of a $0.81 increase per $100,000 of value.

While one rate decreased and two remained unchanged, Coconino County’s secondary property tax levy for its Library District will rise from compared to 2024. Sitting at $0.2756/$100 of assessed value in 2024, the rate will increase to $0.2956/$100 of assessed value.

Mullaney’s presentation listed that as a tax increase of $2.89 on average per $100,000 of property value. The rate increase was done in order to keep the library budget whole, avoid service reductions and maintain bookmobile services.

“You heard from the Library District that there has been insufficient funding with the rate that’s been assessed to continue library operations,� Mullaney said. “There are no other funding sources really for the library. They are primarily funded through tax contributions or if the cities choose to contribute towards the operation of the libraries. So the tax itself is very important to library operations.�

In hoping to fend off some complaints from the public, Mullaney also cited that Coconino County’s combined primary and secondary tax rates still ranked as the third lowest in the state. Additionally, she reminded those concerned about the tax bill that Coconino County is just one piece of a tax bill and multiple other tax districts exist outside the purview of the county Board of Supervisors such as cities, school districts and fire districts.

2025 budget outlook

Mullaney said the 2025 budget holds a recessionary revenue assumption built in as a reliance on sales tax revenues, both locally and for the state,  that may fluctuate due to economic conditions. In total, about $90 million of Coconino County’s revenues come from sales tax from the county ($56 million) and the state ($32 million).

In addition to a 2.5% compensation investment, the budget plans to continue its capital improvement plan by utilizing the county’s road maintenance sales tax for road improvements, as well as facility projects such as a federally funded Tribal Nations Service Center, renovations to county buildings on King Street, and the new Flood Control District/Emergency Operations building. While the ARPA funding will phase out at the end of the calendar year, the county also will continue the Superior Court’s Division 7 Mental Health Court services for six months as part of the budget.

As for the remaining Flood Control District projects for the Tunnel and Pipeline post-fire flooding mitigation efforts, the roughly $10 million in tax revenue is just a small portion of a $70 million budget.

“We’re leveraging that $10 million in a 1-to-6 ratio really to bring in additional federal dollars again for mitigation,� Mullaney said. “That’s a really good example of how local tax dollars can then be used to bring in external dollars federally for what would otherwise be impossible to accomplish simply with local dollars.�

With the largest position of the county’s fund revenues of $74.8 million coming from federal grants and shared revenues, Mullaney explained the number still remains higher than it has been in other years.

“It is a really important way that the county can continue to deliver services without always drawing on just local revenues,� she added.

Across all funding sources, Coconino County Sheriff's Office and jail accounts for 22% of the operating budget, but primarily pulls from its own sales tax. County courts and probation come in at 21% of all funding sources, followed by general government at 15%, health and welfare at 12%, highways and streets at 11%, education at 8%, flood control at 6%, and culture and recreation at 5%.

Mullaney’s presentation also provided each category’s use of the general fund, offering an example of how impactful specific revenue streams are -- such as each district’s secondary-property tax or funding through federal or state grants.

The most drastic departure from the overall look at all funding sources is an increase up to 35% for courts and probation from the general fund and up to 31% for general government use that includes the county’s assessor, finance, human resources, recorder, treasurer, and Board of Supervisors among others. On the opposite end, highways and streets also dropped to 0.4% from 11% and education shifted to 1% from 8%.

Impact from the state

An unknown moving into the 2025 fiscal year is the impact for the county from the state’s budget cut of 3.5% cuts to departments.

“On a long-term basis, we don’t have the ability to absorb cuts from the state, and generally what has happened with those programs is if it’s a state-funded program, if funding has been reduced, the program adjusts to the amount of state funding,� Mullaney said.

One example provided during the presentation was the history of underfunding for the county’s probation department.

The budget includes a backfill of funding planned for the department in order to keep the county employees paid, regardless of the state’s assistance. According to Mullaney, the state discontinuing an increase to probation funding is expected to result in “at least a half of a million dollar impact.�

Should the change, or anything similar, be believed to have a continuing impact in the years ahead, Mullaney said the county’s outlook may change.

“It could change our budget planning in the future if we think we have to absorb that continued high level of cost increases in the future,� she said. “Our assumptions may change in terms of just overall available resources, but for now we will use contingency and continue that backfill to keep our employees fully compensated.�

As Coconino County struggles with its expenditure limit -- which has prompted the decision to seek a permanent increase of $7.7 million to the base limit on the November ballot -- Mullaney also noted that state reductions lead to added pressure for the county’s compliance.

“Whenever the state reduces their support for county programs and then the county general fund has to pick that up, it does impact our expenditure limit,� Mullaney said. “It’s one more thing where we’re using local revenues rather than state revenues to continue the same level of service.�

Peru's final meeting

With the budget approved and the county Board of Supervisors headed to a summer break throughout July, Tuesday’s meeting also served as the final for Coconino County Manager Steve Peru.

Peru’s second tenure as county manager began in April 2021 after initially serving in the role from 2006 to 2011. With Peru stepping back from the role to focus on special initiatives and community partnerships, the Board of Supervisors approved the appointment of current Deputy County Manager Andy Bertelsen as the next county manager.

Bertelsen returned to the county in his current role in 2022 after working for the City of Flagstaff and the City of Sedona. Bertelsen’s new role officially began as of July 1.

“It’s been a privilege and an honor to serve in this position for a little over three years,� Peru said Tuesday night. “The last three years, you kind of look back and say, ‘Wow, where’s the time gone?� We have gone through a lot of ups and downs, and now that we feel that we have a little bit more of a clear path in sight going forward, it seems like the proper time to make the change.�

The board will host a special session on Aug. 9 to canvass the primary election before returning to its regularly scheduled Tuesday meetings on Aug. 13.