Budget Review Commission hears city revenue forecast; commissioners press on maintenance, preserve tax and project costs

Scottsdale’s Budget Review Commission on Feb. 27 heard a detailed presentation from City Treasurer and Chief Financial Officer Sonya Andrews on the city’s major operating revenues and capital funding sources, and pushed staff for more detail on maintenance funding, voter-approved tax uses and risks to the FY 2025–26 forecast.

Andrews told commissioners the presentation used FY 2024–25 budgeted revenues as a baseline while the FY 2025–26 projections were still being finalized. “We are still currently working on our fiscal year 25, 26 revenue projections,” she said, adding staff expects the coming year’s revenues to be “more or less the same” as the current year but that growth is likely to slow from pandemic-era peaks.

The nut graf: the commission focused on how much of Scottsdale’s core government services depend on a few tax streams and on restricted, voter-approved levies. Commissioners repeatedly pressed staff to clarify which revenues are truly available for operating needs and which are legally restricted to specific capital or programmatic purposes — and to show the city’s plan for maintaining existing assets.

Most of the commission’s questions centered on three revenue buckets Andrews identified as making up roughly three-quarters of governmental (non‑enterprise) revenue: the local sales tax, state-shared revenues and property taxes. Andrews explained enterprise and internal service funds (water, sewer, airport, solid waste, health self‑insurance, fleet and risk management) are largely fee-supported and therefore “do not rely on taxes.” She said the city’s largest operating source is local sales tax (the city portion is currently 1.75 percent, dropping to 1.7 percent on July 1, 2025) and that about 84 percent of sales-tax receipts come from a handful of categories (retail, automotive, rentals/construction, restaurants, department stores, food stores and hotels).

Commissioners asked detailed follow-ups about the internal service funds (healthcare self‑insurance, risk management and fleet). Andrews said those funds use actuarial and rate models to set department charges, and staff reconciles over‑ or under‑charging in subsequent years. She said the health self‑insurance fund collects roughly $40,800,000 in employer and employee contributions and the city pays about $5,000,000 in insurance premiums for stop‑loss and excess coverage.

Several commissioners pressed staff about the city’s philosophy on revenue budgeting. Mark Stevens, a commissioner and recent appointee, said he favors conservative revenue assumptions but does not want the commission to be “unduly conservative.” Andrews said staff relies on historical trends and known local developments (for example, new hotels or large retail openings) to set forecasts, and that audit recoveries and timing quirks (one extra payroll week in June, she said) also affect year‑end results.

Risk factors discussed include the state legislative and federal policy environment (for example, potential changes to the grocery‑food tax was raised), the loss of the residential rental sales tax (which staff said will reduce the next full year’s sales‑tax base), and volatility in tourism‑driven categories. Andrews noted state shared income tax allocations are lagged (distributed based on collections from two years prior) and that Scottsdale’s share of state distributions has declined slightly as other jurisdictions have grown faster.

Commissioners also raised equity and policy concerns. One commissioner called the local food (grocery) tax “the most regressive tax” and urged council consideration of elimination, noting other Arizona cities do not tax food for home consumption.

On property taxes and court‑ordered refunds, Andrews told the commission the city’s budget was reduced after the county received a judgment in the class‑action ‘‘Quasimier’’ lawsuit. She said the county’s refund obligation reduced Scottsdale’s expected FY 2024‑25 property tax receipts by about $10 million to the general fund and about $5 million to the secondary (debt service) fund compared with the adopted budget.

After the operating revenue discussion, the commission reviewed capital funding sources. Andrews said enterprise capital (water/sewer, airport, solid waste) is normally paid from fees and dedicated debt; transportation capital is supported by the 0.2 percent transportation sales tax and state highway user revenue; the arterial life‑cycle program is funded by a 0.1 percent arterial sales tax and regional matching funds; and voter‑approved preserve sales taxes and Proposition 490 (the recently approved park and preserve measure) carry legally restricted uses and sunset dates. Andrews said developer‑contributed infrastructure recorded to the city in FY 2024 totaled about $115 million across land, streets and utilities.

Commissioners repeatedly asked staff to show maintenance and lifecycle funding explicitly. Several urged the city to identify a recurring maintenance line for parks, streets and other assets (one commissioner referenced the pavement condition index metric) rather than defer upkeep and allow deferred maintenance to grow. Acting city management and staff said they are preparing additional details for the coming budget and will bring back capital‑program schedules and the arterial life‑cycle program details in March.

Votes at a glance: the commission voted to adopt the prior meeting minutes with corrections (recorded as unanimous, 7–0) and later approved a staff request — by motion of Commissioner Mark Stevens, seconded by Commissioner Daniel Schweickart — asking staff to prepare a schedule of projects that changed in cost by $1,000,000 and 10 percent (covering fiscal 2023‑24 and FY 2024‑25 year‑to‑date). That motion passed unanimously (7–0).

What commissioners asked for next: more granular grant‑source reporting (federal vs. pass‑through state), explicit reconciliations showing how internal service fund rates are benchmarked and trued up, a capital program schedule tying projects to funding sources and expiration dates for voter‑approved taxes, and a future report that lists projects with cost growth exceeding the policy threshold for follow‑up.

The meeting moved to the next agenda item after roughly 90–150 minutes of discussion on revenues and capital funding; commissioners set several follow‑up requests for staff and signaled interest in deeper dives on pensions, contingency, and personnel costs at future meetings.