Lisette Camacho, deputy city manager and chief financial officer, told the council the long-range forecast reflects a $21,000,000 annual loss in residential rental sales tax spread across the General Fund, Transit Fund and Arts & Culture Fund. Camacho said the city has implemented measures over the past two years to preserve fund balance and currently has sufficient reserves to maintain service levels and staffing.

"The measures we've implemented over the 2 years did preserve our fund balance and we have sufficient reserves to fund existing programs and maintain the current staffing level that we have," Camacho said.

Municipal Budget Director Robert Baer described the forecast charts showing revenues and expenditures across funds and warned that expenditures will exceed revenues in the forecast period, with reserves used to balance budgets while staying within the city's 20%--30% fund-balance policy.

"My main takeaway for this slide is that you can see that throughout the forecast period, the expenditures is exceeding the revenues that we're collecting," Baer said, outlining that staff will monitor funds and potentially implement balancing strategies such as freezing vacant positions, reducing service levels where necessary, shifting resources to priority services, and identifying economic opportunities to grow the tax base.

Camacho and Baer noted the forecast does not assume a recession and that some additional adjustments (federal income tax conformity impacts, state revenue reductions from San Tan Valley incorporation) are expected to reduce revenue further in coming years. Councilors asked for clarification on streetcar federal funding; Valley Metro representatives said $13 million was provided for planning and that the planning phase is proceeding though larger federal approvals remain pending.

Staff recommended prioritizing completion of projects in the five-year CIP, no program expansions for four years, and additional budget balancing measures if revenues deteriorate further.