Santa Cruz County Board of Supervisors voted unanimously Wednesday to place a measure on the November ballot asking voters to approve an increase in its annual spending limit by $19.8 million for the fiscal year starting July 1, 2027.
The board’s vote came after public hearings at the county complex in Nogales on July 1 and July 8.
Deputy County Manager Mauricio Chavez explained that the increase would provide long-term stability and allow the county to keep pace with expenses that are rising faster than the Annual Expenditure Limitation formula currently allows, while also enabling the county to spend additional revenues that are anticipated over the next 20 years, in large part due to South32’s Hermosa mining project coming online.
“The county’s operating costs and revenues have been growing faster than the formula’s population and inflation growth factor,” Chavez said. “It’s an old formula that’s keeping us from being able to move forward.”
Chavez stressed that if the measure is approved by voters, “this is not a tax increase, it will not increase tax rates, it will not impose any new taxes or impose any type of fee. It only adjusts the authority of what the board can spend.”
If the measure fails to pass, the county would be bound by its current spending limitation and be unable to spend any additional revenues that are collected above the limit. Chavez said they would be banked in an escrow account. The PRT sought clarification from the Arizona Auditor General’s office as to whether there are provisions requiring the return of excess funds to the taxpayers via tax decreases or other means but did not receive a response.
The establishment of an Annual Expenditure Limit for each of Arizona’s counties was passed by Arizona voters in 1979. It employs a formula that established a “base limit” of 1979-80 expenditures and adjusts annually based on population growth and inflation.
For Santa Cruz County, 1980 expenditures were $2.3 million for a population of 19,500. Its expenditure limit for 2026-27 is $30.4 million to serve a population of 66,497. In comparison, Cochise County has a limit of $87 million for a population base of 135,232.
The county’s proposed adjustment would add $1.5 million to the 1980 base, which would raise the spending capacity to $50.2 million if approved. The new limit would take effect for the 2027-28 fiscal year, and it would be adjusted annually based on population and inflation.
While the new limit would give the board the authority to spend up to that amount, it would not be automatic.
“The county still needs to go through a budget approval process, through a public process that’s approved by the board,” Chavez said. “Spending remains subject to available revenues. The board wouldn’t be able to spend any revenues unless the revenues come in. It’s still the same process.”
Chavez’s report outlined eight potential areas where the additional spending authority could optimize existing county service and investment in capital projects:
- Public safety and emergency preparedness initiative
- Road resurfacing and bridge enhancements
- Water sustainability, preservation, conservation and efficiency programs
- Preservation and restoration investments in the Santa Cruz River
- Future animal control facilities
- Tourism initiatives, including parks, walking trails and heritage areas
- Affordable housing studies and planning
- Educational and workforce development programs
“If this does not pass, I’ll be very disappointed,” said board chairman John Fanning, who represents eastern Santa Cruz County. “Because it can do so much.”
“This is about local responsibility. It is about giving Santa Cruz County local control to meet today’s needs and prepare for tomorrow’s challenges.”
Five members of the public spoke in response to the proposed adjustment at the July 1 hearing, and another 10 addressed the board on Wednesday. While a majority voiced support for increasing the county’s spending authority, several voices of dissension emerged on Wednesday. Among those was Bruce Bracker of Tubac, who served two terms on the Board of Supervisors until being voted out of office in 2024 in the wake of an embezzlement scandal involving former County Treasurer Elizabeth Gutfahr.
Bracker suggested the scale of the increase was too large, projects out for too long a period of time and too reliant on a single source of revenue (South32).
“I believe that this expenditure limitation is an overreach,” he said. “The current approach to projecting out into the future 15 to 20 years is not a financially viable strategy.”
“Your outlook should be six years, and you should be requesting 25 percent of your current proposal. In doing so it allows you to build trust and engage with the community. You can always come back to the community in any election cycle to get another increase when needed.”
Jay Thompson of Rio Rico spoke at both hearings, and while he said he is not opposed to an increase in the spending limit, he took exception to the lack of specificity about how future spending would be prioritized.
“We need clear details on where the additional spending authority would go and what safeguards would be in place. … It must come with detailed planning, specific priorities, clear plans and greater transparency on how these funds will be used.”
Fanning said the specific spending priorities will become evident as the county moves forward with its comprehensive plan.
“I think as we move forward, that specificity will come along with it,” he said. “One of the things I’ve learned in government is that things move slowly, but if this passes, we’ll have that entire year to listen to constituents, have meetings throughout the county and find out what are your priorities. Personally, one of the things that’s been on my mind from Day One is recreation.”
The county’s analysis for seeking a base level adjustment must be approved by the Arizona Auditor General before it can become law. And that adds another layer of complexity.
In a notice dated July 2, the Auditor General’s office notified county manager Jesus Valdez that the county is delinquent on submitting audited financial statements for fiscal year 2025 and annual expenditure limitation reports for fiscal years 2024 and 2025. Statutes require that the reports be submitted within nine months of the fiscal year-end.
The delinquency comes on top of already existing friction related to the county’s lawsuit against the Auditor General over its failure to detect a 10-year embezzlement scheme by former treasurer Gutfahr, who made off with more than $38 million in taxpayer funds, and the county is suing the AG to recoup losses that it says should have been discovered in annual audits.
Chavez told the board that the embezzlement and the delinquent financial reports are interconnected. He said a newly assigned independent auditing firm, Walker and Armstrong, is essentially starting from scratch in analyzing the county’s financial books, requiring the county to reconstruct financial records dating back to 2007.
“We are committed to completing those audits as quickly as possible without compromising their accuracy and integrity,” he said.
Chavez said he anticipates the 2024 audit to be completed by Aug. 31, and then the 2025 audit would begin, with an anticipated completion date of March 31, 2027.
Valdez acknowledged that the county was remiss in not communicating the delayed reports to the community and said that an audit update will now be a monthly fixture on the board’s agenda.
Alejandro Castaneda of Lake Patagonia Estates told the board that the lack of financial documentation warrants a postponement in the spending limit measure, but the board did not agree.
Chavez noted that the county’s responsibilities and service demands are far greater today than in 1980. He said that the county forecasts expenses to grow by about 6 percent per year, as opposed to 3.5 percent forecasted in the current formula – creating a projected gap of $4.58 million in five years, $12.02 million in ten years and $19.54 million by fiscal year 2041.
“We would have a challenge to meet service demands that we have today,” he said, let alone invest in capital projects such as a new animal control facility, which was endorsed by a number of speakers at Wednesday’s hearing.
Furthermore, the county has seen sales tax revenues increase an average of 7.2 percent. “Revenues are going to be coming in, but we’re not going to be able to spend them,” he said.
Fanning said he is aware of what he calls “the elephant in the room” — a history of malfeasance by county officials that cost the county and taxpayers millions of dollars.
“We can’t go back and change the past,” he said. “But we can certainly affect the future. I’m sorry for what’s happened in the past, I know it can take a long time to build that trust, but this board is committed to making sure that never happens again.”
Forecast Expenditures vs. Current Estimated Expenditure Limit
| Fiscal Year | Expenditure Limit | Forecast Expenditures | Gap (Expenditures over Limit) |
| 2026-27 | $30.4 million | $30.4 million | |
| 2027-28 | $31.5 million | $32.26 million | $0.76 million |
| 2031-32 | $36.15 million | $40.73 million | $5.76 million |
| 2036-37 | $42.88 million | $54.5 million | $12.02 million |
| 2040-41 | $49.26 million | $68.81 million | $19.54 million |