Oro Valley, just northwest of Tucson, is known for its stunning views of the Catalina and Tortolita Mountains and an elevated lifestyle that blends outdoor living with high-tech innovation. Named the “Upscale Tech Mecca of Southern Arizona” by the Arizona Daily Star, the town is a hub for aerospace, bioscience, and emerging industries like optics and EV battery manufacturing. Families also are drawn to Oro Valley for nationally ranked schools like BASIS and the Amphitheater School District, as well as the miles of trails perfect for hiking and biking. Yet, despite these draws, the town is facing the financial realities of a growing city. As the Town Council considers implementing a new 2.5% commercial rental tax to bridge a budget deficit, it is important to examine what this policy actually means for local businesses and the vacant storefronts visible throughout the town.
The Town’s motivation for this proposal stems from a critical need to address a revenue deficit that threatens the services residents value most. Specifically, the rising costs of maintaining public safety and road infrastructure are spilling over into the town’s general fund, creating a financial gap that officials argue must be filled. To address this, the Council has already decided to increase fees for Parks and Recreation classes and facility rentals, and they are continuing to explore updates to the Stormwater Utility fee. The proposed commercial rental tax is part of a broader suite of potential new revenue streams—including a Use Tax and a Telecommunications Tax—that mirror levies already in place in neighboring communities like Marana, Tucson, and Sahuarita.
To the average resident, a commercial rental tax might sound like a fee levied on landlords or building owners, but the reality is quite different. The landlord serves as the medium to collect the tax from the tenant (which most leases allow), and pay it to the municipality, meaning the tenant shoulders the financial responsibility. If this measure passes, the local pizza shop, small bar, and the independent bookshop will likely see their rent increase by 2.5% overnight. For small businesses already operating on razor-thin margins, an extra few hundred dollars a month can be the deciding factor between staying open or closing their door.
The timing of this proposal is concerning given the current state of Oro Valley’s retail market. Rob Tomlinson, Principal and Retail Specialist at Cushman & Wakefield | PICOR, highlighted the town’s negative absorption, which essentially means that over the last year, more businesses have moved out of Oro Valley than have moved in. In the past 12 months alone, the town saw over 31,000 square feet of retail space go empty. This statistic serves as a warning for the local economy; adding a new tax would add more strain on an already struggling market. As Tomlinson noted to the council, it is simply not the right time to explore revenue enhancement through a tax that burdens struggling small businesses.
Proponents of the tax often point out that neighboring municipalities like the City of Tucson and Marana already levy a similar rental tax, arguing that Oro Valley should follow suit. However, this comparison ignores a critical difference in market strength. Tucson’s commercial vacancy rate currently hovers around 6%, indicating a high demand that allows businesses to absorb additional costs. In contrast, Oro Valley is grappling with a vacancy rate around 12% meaning the town has double the amount of empty space compared to its neighboring cities. When landlords are already struggling to find tenants for nearly 400,000 square feet of vacant space, implementing a cost barrier puts Oro Valley at a competitive disadvantage.
This creates a conflict with the town’s stated desire to stop “retail leakage.” Mayor Winfield has noted that residents spend approximately $1.2 billion annually outside of town limits, money that could be supporting local services. While the goal is to keep those tax dollars closer to home, taxing commercial leases works against that objective. If it becomes more expensive to rent space in Oro Valley than in a neighboring area, new businesses will simply choose to open elsewhere. The town might gain a small amount of revenue from the rental tax, but they risk losing the far more significant sales tax revenue if those businesses never open in the first place.
Instead of a new tax that burdens struggling retailers, Tomlinson recommends taking a global look at encouraging development. The priority should be filling those empty storefronts with thriving businesses that generate sales tax naturally. By making Oro Valley the most business-friendly environment possible, the community can close the vacancy gap and fund public services through economic growth rather than by squeezing the shops that are already fighting to survive. The community will soon see a resolution to this debate, as the Oro Valley Town Council is set to vote on the tax in January 2026.
SOURCES:
“Oro Valley Approves Fees, Delays Tax Decision.” KOLD News 13, 16 Oct. 2025, https://www.kold.com/2025/10/16/oro-valley-approves-fees-delays-tax-decision/.
“Don’t Levy Rental Tax, Broker Says.” Tucson Local Media, Oct. 2025, https://www.tucsonlocalmedia.com/explorernews/news/don-t-levy-rental-tax-broker-says/article_a81f7582-4689-4207-82a4-7a5b40d7b080.html.
Schutte, Karen. “Oro Valley Emphasizes Resilience, Fiscal Discipline, and Economic Development at 2025 State of the Town.” Real Estate Daily News, 26 Nov. 2025, https://realestatedaily-news.com/oro-valley-emphasizes-resilience-fiscal-discipline-and-economic-development-at-2025-state-of-the-town/.
