Oro Valley projects small FY25 general-fund shortfall; spending savings, higher interest income reduce draw on reserves

David Gephard, a town staff member, told the Oro Valley Budget and Finance Commission on Aug. 19 that the town’s general fund is tracking slightly below last year while savings on spending and unexpectedly strong interest income are narrowing a projected budget gap.

Gephard said town revenues through May are “down about 4 percent year over year,” driven mainly by local sales tax and state-shared revenues, but that personnel vacancies and operating savings are trimming expenditures. “We are expecting for our year-end estimate to come in just a bit under budget, about $170,000,” he said.

The update matters because the general fund pays for core services the town prioritizes, including public safety and pavement preservation. Gephard told commissioners that projected savings in personnel and operations and maintenance will reduce the planned use of general-fund balance from roughly $4.1 million in the budget to about $2.3 million as of the May estimate, and that the town’s 30 percent expenditure reserve policy remains exceeded by an estimated $4.4 million.

Key figures presented by staff included: local sales-tax collections down about 3 percent year over year; state-shared income-tax receipts lower by about $2.1 million; and licenses and permits already over budget, helped by single-family residential permits (106 through May versus 95 budgeted). Gephard said building-permit collections through May were roughly $970,000, below last year’s $1.2 million, but that the town expects to exceed the current-year budget for residential permits.

Interest earnings were substantially above budget, Gephard said, noting the budgeted amount for interest was $400,000 but actuals were just under $800,000 through May. He also said a one-time rebate from AM RRP was reflected in miscellaneous revenue.

On expenditures, Gephard reported the general fund was at about 84 percent of budget through May and that staff project approximately $1.3 million in personnel savings and $400,000 in operations-and-maintenance savings, producing roughly $1.7 million in total projected expenditure savings for the general fund.

Other funds: the highway fund is expected to finish roughly on budget with capital and O&M savings improving the year-end estimate; the community center fund is outperforming budget—revenues were at 105 percent through May and the fund is now projected to add about $750,000 to fund balance rather than use $115,000; the capital fund showed project rollovers with about $4.5 million spent through May against a $10.3 million budget; the water utility fund is tracking above budget on revenues and is expected to add more to fund balance than anticipated; and stormwater has modest savings and a nearly completed Sierra Wash project that will post a federal grant at fiscal year-end.

Commissioners questioned specific line items in the presentation. Commissioner Mason asked about membership dues showing an 11 percent increase while total membership rose about 1 percent; Gephard said he would have to follow up with more detail. Vice Chair Carlsberg asked whether underspending by departments could cause issues later; Gephard cautioned about typical year-end spending patterns and said staff will monitor and provide a full-year June report next month.

Commissioner Kesey asked how confident staff were that proposed new revenue measures (discussed later in the meeting) would close the town’s pavement-preservation shortfall. Gephard said the town’s estimate for a new use-tax category ranges widely and that an initial midpoint could cover a meaningful portion of pavement-preservation cost increases, but he cautioned uncertainty and the need to monitor collections over time.

The presentation closed with staff offering supplemental materials in the meeting packet and inviting further questions at the next report, which will include the full fiscal-year close.

Votes at a glance: the commission approved the minutes for the May 20, 2025, and June 17, 2025, regular-session meetings by voice vote. Commissioner Mason moved to approve the May 20 minutes; Commissioner Gazzi seconded. Commissioner Mason moved to approve the June 17 minutes; Commissioner Agnese seconded. The motions passed by voice vote.