Five-year forecast warns of declining state-shared revenue, steep road-maintenance costs

Oro Valley staff presented a two-scenario five-year financial forecast April 16 that highlights pressure on capital funds if state-shared revenues decline as projected and pavement-preservation costs remain elevated.

Finance staff told the committee they expect general fund operating revenues to dip in the next two years largely because state-shared revenues are forecast to decline after recent state tax changes. At the same time, highway and capital funds face rising costs: staff said pavement-preservation costs have increased roughly 50%, from about $2 million per year previously to about $3 million or more.

“Because that excess is utilized to fund capital, then we obviously have less resources available to fund capital,” staff said, describing how a narrowing operating surplus reduces transfer capacity to capital projects. Staff presented two forecast variants: one without a debt issuance (showing capital fund pressure and negative balances in later years) and one that included a placeholder bond issuance (presented as roughly $11 million in the model) that helped preserve fund balances in the near term.

Commissioners asked detailed implementation questions: how charge-for-service increases were modeled, whether the Oro Valley Path Forward general-plan work would require additional permanent FTEs (staff said consultants or temporary contract staff were likelier), whether a new police station is included (staff said it is a placeholder in the 10-year CIP and not included in the forecast), and questions about vehicle replacement assumptions.

Staff also flagged contingency planning if the regional transportation authority (RTA) funding is not renewed: one option discussed would be a town-specific half-cent sales-tax replacement that would come to the town rather than RTA and could be dedicated to roads and capital. The committee requested follow-up analysis of funding options and asked staff to incorporate the chosen PSPRS contribution schedule into the five-year forecast.

The forecast presentation concluded with staff noting that while operating results remain structurally balanced, transfers to capital will decline under current assumptions and the town will need to identify additional revenue or capital-funding strategies to avoid constrained capital delivery.