Oro Valley forecasts tightening finances over next five years; council presses staff on assumptions

Oro Valley officials on March 18 heard a detailed five‑year financial forecast from Chief Financial Officer Mr. Gephart that projects a narrowing operating surplus in the general fund and deep cuts or deferrals to capital projects to keep the town’s books balanced through fiscal 2031.

Gephart said the forecast covers four major funds — general, highway, capital and community center — and is a "baseline forecast" built on currently known information and modest growth assumptions. "We are continuing to see a reduction in operating surplus in the general fund," he said, noting staff refined sales‑tax revenue projections downward in light of recent collections and incorporated the council‑directed change in general fund reserves.

The presentation assumed conservative sales‑tax growth (roughly 1%–5% across categories), included the newly approved use tax, and modeled the OV Marketplace occupancy impact as about $2.2 million in additional sales tax revenue cumulatively over five years. The senior budget analyst clarified the $2.2 million represents a cumulative population‑driven sales‑tax effect across the forecast period, not construction sales tax receipts.

Councilmembers questioned several assumptions. Councilmember Green asked how electric vehicle adoption affects highway fund gas‑tax revenue; Gephart said EVs reduce gas‑tax receipts and called for state‑level solutions or alternative funding. Mayor Winfield and others pressed for scenario planning; Gephart acknowledged the document is preliminary and said staff plans optimistic and pessimistic scenarios in future iterations.

Gephart also outlined the capital cuts that balance the forecast and said the town preserved pavement‑preservation projects as a priority. "We prioritized safety‑related items and pavement preservation," he said. The forecast anticipates transfers from the general fund to keep the highway and community center funds solvent and projects an overall modest increase in aggregate ending fund balance over five years.

Why it matters: the forecast is a planning tool that will guide the upcoming budget process. It flags shrinking recurring surpluses and limited capacity for capital spending; councilmembers repeatedly asked staff to prepare alternate scenarios and additional detail on revenue drivers before final budget decisions.

What’s next: staff will use the forecast as a basis for the manager’s recommended budget and said they will bring further analyses, including more granular scenario modeling and project‑level details, during the budget season.