Oro Valley staff report $4.3M shortfall this year; five‑year forecast trims capital and holds reserves

Vice Chair Garland opened the Budget & Finance Commission meeting and staff presented the town’s midyear financial update and a preliminary five‑year fiscal forecast.

Deputy Finance Director Wendy Gomez told commissioners the midyear information is unaudited and that through December 2025 total revenues were about $400,000 higher than the prior year but the town now anticipates “an overall shortfall of about $4,300,000,” primarily because construction sales tax collections underperformed. She said transfers out of the general fund are about $2.8 million higher than last year and that, after accounting for an additional $2 million transfer to capital, the town currently forecasts an ending general‑fund balance near $14.9 million at year end, which remains above the council’s 25% policy by roughly $2 million.

Gomez called out areas of strength: licenses, permits and grants. She noted 51 single‑family permits were issued through December (out of 117 budgeted) and that development associated with the Oro Valley Marketplace apartments boosted residential permit revenue. Grants and reimbursements — including RTA reimbursements and an SRO grant tied to local schools — were performing above prior year amounts through December.

Commissioners followed with technical questions about forecast timing and assumptions. Commissioner Moonhart asked whether year‑end estimate revisions are made quarterly; Gomez said staff updates estimates on a quarterly basis and will make off‑cycle adjustments if material trends emerge. On highway user revenue, staff explained the state formula includes components of gas tax and vehicle license revenue and uses county activity and population in the allocation.

On enterprise funds, Gomez said golf and contractor Indigo have outperformed prior expectations and she projected golf contractor revenue above budget, while the water utility has seen higher consumption and revenue — a result of a dry summer and fall — and is forecasting a smaller use of fund balance than originally planned.

Following the midyear review, Mr. Gephart presented the town’s five‑year baseline forecast through fiscal 2031. He said staff reduced expected construction sales tax and made deep cuts to the capital improvement plan to preserve operating reserves. Key assumptions include no new debt issuances, no assumed impact from future MOU negotiations beyond known step increases, and a conservative 1%–5% growth range for most local sales‑tax categories. The forecast also assumes voter approval of RTA Next, which staff said voters recently approved.

Gephart told the commission that the forecast is intentionally lean on capital spending — showing minimal capital outlays in some years — because the town is managing transfers out to preserve a 25% general‑fund reserve. He recommended a two‑year reserve baseline for the capital fund (roughly $7 million) to ensure the town can complete multiyear projects and meet contract obligations. He warned the forecast is “razor thin” and flagged risks including inflation and fuel costs, potential state legislative changes to revenue sharing, and the effect of other municipal incorporations on state shared revenues.

Why it matters: staff said trimming capital and maintaining reserves are options to avoid larger structural deficits in future years; commissioners pressed for clearer presentation of transfers (debt service vs. capital) so the public can better understand where funds are going.

Next steps: staff will present the forecast to Town Council; commissioners accepted the midyear presentation for review and asked for clearer transfers breakout and supporting detail on assumptions and risks.