Mesa OMB warns reserves could fall below policy in 2028–29 after revenue losses and public‑safety pay adjustments

Mesa budget officials on March 6 presented a multi‑year forecast showing revenue headwinds and rising expenses that, if unaddressed, could push the city’s general fund reserves below council policy by fiscal 2028–29.

Brian Richel, director of the Office of Management and Budget, told the council the forecast reflects three principal revenue pressures: the loss of the residential rental sales tax (staff said that source supplied just over $18 million annually to the general fund), enactment of the state “flat tax,” and sluggish sales tax growth. Richel said staff used an apples‑to‑apples homeowner comparison across Valley cities to frame cost and rate decisions.

Public‑safety compensation and benchmarking

Scott Butler, assistant city manager, told council that a benchmarking analysis completed for sworn police and fire positions showed Mesa lags peer cities and that bringing sworn pay to market carries a material, ongoing cost. “The impact for both the adjustments to police and fire sworn personnel … is about $23,000,000,” Butler said; that figure excludes additional step‑pay costs that will be added for eligible employees in the coming fiscal year.

Staff said the city faces other expense pressures including rising fleet maintenance and repair costs, higher solid‑waste disposal and receptor contract charges, increasing chemical and power costs at water and wastewater plants, and growing software and cloud licensing fees.

Reserve targets, options and timing

OMB staff reviewed the city’s financial principles and reserve targets (an 8–10% general‑fund target and a 20%+ target for utility fund balances). The forecast scenarios shown to council illustrate that without additional actions the general fund balance would decline toward and below the policy band by 2028–29. Staff presented one illustrative option for council consideration: a voter measure adding a second 0.25 percentage‑point public‑safety sales tax (doubling the current 0.25% public‑safety rate to 0.5%). Staff estimated the current 0.25% public‑safety tax collects roughly $30 million annually; an additional 0.25% would raise revenue at an approximate, illustrative scale discussed in the presentation.

Council and staff emphasized prioritizing expense reductions and operational efficiencies before or alongside any revenue proposals. City Manager Chris Brady said the forecast is a planning tool and that staff will continue to seek efficiencies and will return with specific budget proposals. “If we don’t plan today, we’re going to be behind for tomorrow,” Brady said.

Budget calendar and public engagement

Staff outlined the budget calendar: the City Manager’s proposed budget will be presented April 3; departmental budgets will be heard through April; the tentative budget is scheduled for May 1 with final adoption in June. OMB also scheduled two community budget meetings (May 7 at Red Mountain and May 14 at the Post) and staff said it will post information and accept written public input through the process.

Quotes

“We take a look at what a typical resident pays for full service in a city,” said Brian Richel, describing the homeowner comparison that OMB uses to evaluate utility and tax competitiveness. “The impact for both the adjustments to police and fire sworn personnel … is about $23,000,000,” Scott Butler said of the benchmarking results.

What council directed and next steps

Council did not take a binding vote on new revenue measures on March 6. Members asked staff to continue work on expense reductions and to present a proposed budget on April 3, with staff returning in the coming weeks to present specific options for both expenditure reductions and any revenue proposals. Staff will also present more detailed utility rate modeling and options for solid‑waste service models during the budget process.

Context

OMB staff noted some Valley cities have recently adopted large utility or tax rate changes to address capital and operating costs; staff said Mesa’s longstanding approach has been to smooth rate changes to avoid sudden, large increases for residents. The presentation also described multi‑year capital projects that affect utility budgets, including the Central Mesa reuse pipeline, a water treatment plant expansion and an advanced metering infrastructure project.

Ending

Staff said they will return with the City Manager’s proposed budget on April 3, host community budget meetings in May, and present the tentative and final budgets according to the calendar; council members reiterated a preference to prioritize expense savings and to evaluate revenue options carefully before moving to ballot measures.