Mesa City Council discusses financial forecasting amid revenue pressures and expenditure challenges

The Mesa City Council held a study session on March 6, 2025, focusing on financial forecasting and budgetary challenges facing the city. The meeting addressed key issues related to rate increases, community facilities districts, and the city's financial outlook.

The session began with discussions on the importance of gradual rate increases to avoid sudden financial shocks. Council Member Heredia highlighted the experience of neighboring Gilbert, which faced significant rate hikes after years of no increases, emphasizing that Mesa's approach aims to prevent such drastic measures.

The council also discussed community facilities districts (CFDs) and their exclusion from financial comparisons. It was noted that while some cities, like Scottsdale, have CFDs, Mesa does not include these in its financial assessments due to the variability in homeowner association fees and the unique circumstances of each community.

Following this, city officials presented the financial forecasting process, which includes evaluating current expenses and revenues, historical trends, and future needs. The forecasting aims to ensure financial sustainability by aligning ongoing revenues with ongoing expenditures. The city utilizes statistical software to analyze economic trends and their impact on revenue sources, considering factors such as population growth and economic development activities.

The discussion then shifted to expenditure categories, including personal services, specialty contracts, and capital projects. The council emphasized the importance of maintaining a reserve of 10 to 15% over a five-year forecast period and ensuring that wages and benefits remain competitive with other municipalities.

The meeting concluded with a review of the current financial outlook, which revealed revenue pressures due to the loss of the residential rental sales tax and the implementation of a state flat tax. These factors, combined with stagnant growth in city sales tax, present significant challenges for the city's budget moving forward.

Overall, the session underscored the city's commitment to careful financial planning and the need for ongoing discussions about budgetary strategies to maintain service levels while addressing revenue shortfalls. The council plans to continue these discussions in future meetings as they work towards a sustainable financial future for Mesa.