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Oro Valley CFO reports unaudited shortfall in early FY25–26; council seeks project-level revenue assumptions
Summary
CFO Gephart presented an unaudited quarterly financial update through Sept. 2025 showing general fund revenues below expectations (≈21% of budget, ~$2.5M shortfall estimate) and increased transfers/outlays; council asked for project-level assumptions, clarification on bed tax timing and a payer behind on remittance.
The Oro Valley Town Council heard an unaudited quarterly financial update through September 2025 from Chief Financial Officer (CFO) Mr. Gephart on Nov. 19, 2025. Gephart emphasized the figures are unaudited and subject to change.
Gephart said total general fund revenues were lower than the prior fiscal year by about $535,000 and that revenues were at roughly 21% of the annual budget through the first quarter, reflecting a projected shortfall of about $2.5 million relative to where the town would expect to be one-quarter into the year. He attributed the shortfall primarily to weaker local sales tax collections, led by underperformance in construction sales tax. “The primary driver of this shortfall was local sales tax revenues,” Gephart said.
On uses, total outlays through the first quarter exceeded prior-year levels by about $1.92 million, driven mainly by increased transfers out of the general fund and higher personnel costs (about $650,000 higher than the prior year). Gephart said the change in fund balance decreased by approximately $5.2 million during the first quarter and that staff currently forecasts a greater use of fund balance at year end than originally budgeted.
Gephart also reviewed line items: construction sales taxes are down (construction sales tax underperformance cited as about $650,000 vs prior year), retail/bed tax/restaurant taxes underperformed budgets, while development fees and grants performed better than the prior year in some categories. Grants revenue was noted as strong through the first quarter (roughly 77% of the year-to-date budget for grants). Water sales increased vs last year (about $598,000 higher, attributed to a dry summer) and golf and community center revenues generally outperformed prior year first-quarter results.
Council members pressed for more detail on assumptions underlying revenue forecasts. Mayor Winfield asked whether bed tax figures accurately reflect lodging activity; Gephart said there are multiple factors, including at least one payer that has fallen behind on remittance and that Arizona law prevented him from elaborating on that specific account. Vice Mayor Barrett asked that staff return with project-level assumptions used in the construction sales tax forecast — for example, which specific planned projects (marketplace, apartment complex, hotel) were expected to be built and when — so the council can better understand the drivers of the revenue variance.
Gephart recommended staff will likely bring an agenda item in coming months to reallocate early months of the half-cent sales tax from the community center fund to the general fund for comparison purposes in light of a mid-year migration of that revenue stream.
No formal council action was taken on the financial presentation; council members asked staff to provide a report or memorandum with more granular project-level assumptions and timing on tax remittance practices to improve forecasting transparency.
