Oro Valley Town Council discussed proposed business taxes during an Oct. 15 study session. Chief Financial Officer Dave Gephart said the items would be brought back for a formal vote on Nov. 5, after staff notifies local businesses.
The proposal would add three separate 2.5% taxes for telecommunications, commercial space leases, and business use of equipment purchased outside jurisdictions that collect sales tax. Town officials said the changes are intended to address a projected structural deficit, with future expenses expected to exceed incoming revenue.
Gephart said Oro Valley’s existing 2.5% retail sales tax does not apply to groceries or gasoline, and that some professional services, including medical and dental offices, do not generate sales tax. He said the town receives revenue through utility taxes such as water and electricity, but does not receive revenue from the services themselves.
Projected revenue and budget context
Town estimates from the finance department say the three taxes combined could raise between $930,000 and $1.88 million annually.
Gephart also said the town faces challenges related to an aging demographic, including higher local use of medical and professional services that generate little to no local sales tax. He said reserve funds are used for capital improvements such as roads, parks, and public facilities.
In the first study session on the topic on Oct. 1, some councilmembers raised concerns about whether the town should use reserves before imposing new taxes. Mayor Joe Winfield said the proposed taxes are one part of a broader plan and discussed factors including approval of roughly 900 new apartment units, use of bonds to reduce long-term police pension costs, and annexations of nearby commercial properties.
Town staff also shared information that pavement maintenance costs doubled in four years, rising from $1.5 million to more than $3.1 million per year, driven by inflation, aging roads, and higher materials prices.
Gephart said town operations face similar financial strain and that staff expects no “perfect time” to act.
Next steps
Residents can review proposed tax information and submit comments through OroValleyAZ.gov. The Nov. 5 meeting will determine whether the council authorizes business notification and begins the process of enacting the taxes. The town said implementation could occur in early 2026.
Gephart said nearby communities in Pima County have adopted similar measures, including Marana, Sahuarita, and Tucson.