Scottsdale staff present $2.21 billion FY25-26 budget; reserves and one‑time pension payment shrink fund balance

Scottsdale staff on April 7 presented a $2.207 billion proposed budget for fiscal year 2025–26, telling the Budget Review Commission the plan balances resources and spending while drawing down reserves and repurposing some capital spending.

Budget presenter Sonia opened the commission briefing, saying, “I am very pleased to present the fiscal year 25, 26 proposed budget to the commission.” She and other staff walked commissioners through the major totals: a $885.5 million operating budget, $952.0 million proposed for capital improvements, and $370.4 million in contingencies and reserves. Staff said the proposed total is a 3.8% decrease from the current adopted budget of $2.29 billion, a decline driven mainly by lower capital spending and smaller reserves.

Why it matters: the proposal uses one‑time resources to lower a material pension liability and to carry forward large capital projects that were not completed in the current year. Staff said the city begins the budget with $1.39 billion in beginning fund balance and expects an ending fund balance of about $751 million; that difference is explained in part by a $50 million one‑time payment to the Police and Public Safety Retirement System (PSPRS) and $33 million of planned transfers from the general fund to capital projects.

Key budget details presented by staff: - Total proposed budget: $2,207,000,000. - Operating budget: $885,500,000 (includes a $50,000,000 one‑time PSPRS payment and a $12,500,000 reclassification from capital to operating). - Capital improvements proposed: $952,000,000 (staff said the capital figure reflects carryforwards and schedule changes). - Reserves/contingencies: $370,400,000 (down roughly 20% from the current year level). - The operating budget line that compares “apples to apples” moves from $761.7 million in the current year to $823.0 million next year; staff indicated the larger number reflects salary adjustments, new positions and certain transfers in from capital.

Staff also explained revenue assumptions and pressures. The local sales tax rate shown in staff slides will effectively decline from 1.75% to 1.70% because a voter‑approved 0.2% preserve tax sunsets while a new 0.15% park-and-preserve tax becomes effective July 1. Staff listed other revenue impacts the commission asked about: the loss of residential rental sales tax (about $16 million annually when fully implemented) and the impact of the state flat income‑tax change (roughly $6 million in the proposed year). Staff also flagged a set of recently approved rate and fee changes—water rates (+4.5% projected to generate $7.7 million; sewer +6% projected to generate $4.8 million; residential solid‑waste +5% projected to generate $1.7 million).

On fund balance and sustainability, staff said the general fund will draw down about $79.7 million in FY25‑26, principally the $50 million PSPRS payment and $33 million transferred to capital improvements. Commission discussion focused on whether the PSPRS payment was the best use of one‑time funds. Staff said that without the $50 million payment the general fund would not be structurally balanced in the five‑year planning horizon and that using the cash for other one‑time needs would require making approximately $4–5 million of ongoing cuts or other offsets in future years.

Capital program and carryforwards: staff told the commission the proposed CIP is lower than the current year’s adopted total largely because of reclassification and project timing. Staff said $536.1 million of projects are carried forward from prior years and that the proposed capital budget is about $978.5 million after adding new and carried‑forward projects. Staff cited changes such as moving the Cactus Pool project into FY26‑27 and increasing overlay/street preservation funding by shifting a Thomas Road allocation to overlay.

What commissioners asked and flagged for follow up: commissioners pressed staff to correct wording that described a voter‑approved tax as “sunset by staff” (Commissioner Carla asked staff to clarify that a voter‑approved tax “could sunset 2027” only if voters act). Commissioners also pushed for clearer explanations of how salary and FTE increases break down between new positions and cost increases for existing staff, and for more detail on the property tax levy calculation.

Ending note: staff said the five‑year plans in the budget binder show the general fund returning to small annual surpluses in later years after the PSPRS payment and planned transfers, but commissioners asked for additional analysis on ongoing versus one‑time choices before the item goes to council.