Forecast shows slower near‑term revenue growth; council approves $18.7M budget adjustments as assured water supply and state tax changes cut expected receipts

Deputy Town Manager and CFO Scott McCarty presented a five‑year revenue forecast to the Queen Creek Town Council and asked the council to approve budget adjustments for fiscal year 2024–25. After discussion the council approved the adjustments unanimously.

McCarty told the council the town remains in a strong financial position with healthy reserves, but the near‑term runway for new recurring resources will be lower than in recent years. He identified two principal drivers of reduced near‑term revenue growth: an assured water supply requirement that has constrained the supply of buildable single‑family lots, and state legislative changes that reduced certain shared revenues.

On development, staff said the town expects about 1,800 buildable lots at the end of the fiscal year and projects another 1,800 become available over the next three years for a total inventory of roughly 3,600 buildable lots. Staff said historical single‑family permit activity averaged roughly 1,500 permits on a rolling 12‑month basis; with the current supply assumptions staff model slower single‑family permit receipts through the next three fiscal years, producing an estimated $2.5 million reduction in building‑permit revenue for the coming year compared with prior projections.

On state revenue, McCarty explained that Arizona’s shift to a flat income tax and earlier legislative changes have reduced the town’s state‑shared receipts. Staff estimated cumulative annual reductions of about $4.5 million a year from the income tax change (about $3.3 million) and the elimination of a residential rental tax (about $1.2 million) compared with earlier peak years.

McCarty said the town continues to expect overall reoccurring revenue growth (sales tax and other sources) but at lower absolute levels than the town used to count on for new programs. He noted that construction sales tax continues to be significant but is largely one‑time revenue; for planning purposes staff separates recurring revenue from one‑time construction receipts to clarify what resources are available for ongoing services.

The forecast also excluded long‑term operating revenues tied to the state lands employment campus (LGES) until the town has greater confidence in ongoing sales tax and service flows from that development. McCarty said the staff will continue to refine those projections as the project approaches operation.

Council discussion touched on the practical effects. Councilmember Benning urged continued advocacy with state leaders to protect local revenue tools and to obtain alternative designations that would allow local development to continue. Councilmember Brown asked staff to provide HOA and large‑account breakouts in the context of the water‑rate discussion; staff agreed to provide a list of top accounts and HOA impacts during the 60‑day notice period for the water rate hearing. Councilmember McClure asked about headroom in the town’s reserves; McCarty said reserves are strong but urged caution on adding recurring new costs.

Motion and vote: Council approved budget adjustments for fiscal year 2024–25 in the amount of $18.7 million. The motion passed unanimously.