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Water utility debt for NERDS project drives large fund balance drawdown in manager'recommended budget
Summary
CFO Dave Gephart told council most of the townwide fund balance decline in the FY2026 recommended budget is attributable to NERDS water system spending and recent debt issuances, prompting staff to recheck ending balances for the tentative budget.
Oro Valley's Chief Financial Officer Dave Gephart told the council on May 5 that the townwide fund balance projection for the manager'recommended FY2026 budget declines by about $32.1 million compared with the current year, and he said roughly $24.7 million of that decline is due to spending and debt for the Northwest Recharge Recovery Delivery System (NERDS) project in the water utility.
Gephart said the recommended budget reduces capital spending overall but increases debt service after recent water utility debt issuances. Staff projected a $9.44 million decrease in the water utility fund balance next fiscal year, which would leave about $813,000 in the water fund at fiscal'year end in the recommended numbers; Gephart said staff will reexamine the water fund projection and likely revise the tentative budget figures to preserve required cash reserves.
Why it matters: The NERDS project is the primary capital driver in the town's recommended budget and has direct effects on transfers from the general fund, debt service and multi'year capital planning. Council members asked staff to sharpen assumptions for the water fund and to return with updated numbers for the tentative budget.
Additional notes: Gephart emphasized that a lower excess of operating revenue over operating expenditures will reduce transfers to capital beginning in FY2027 under the five'year forecast. Council discussion touched on the need to track bond proceeds, project spend down and projected cash balances carefully before final budget adoption.
Next steps: Staff said they will revise water fund projections and present updated tentative budget numbers for council review.
