Mesa says five‑year forecast returns to structural balance after department cuts and revenue revisions

City staff told the Mesa City Council on Feb. 26 that the city’s five‑year general governmental forecast is back on a trajectory to structural balance after a round of department reductions and revised revenue assumptions.

Presenters said the city has absorbed several external hits in recent years — most notably the loss of residential rental taxation (an $18,000,000 annual impact that began last fiscal year) and the potential effect of state tax conformity tied to federal HR 1 (staff estimated an illustrative $6,000,000 annual hit beginning in FY27‑28 under a worst‑case conformity scenario). "Mesa is still the third, most affordable city within the valley that we compare to," a presenter said while explaining the homeowner‑cost comparison methodology that combines secondary property tax, city sales tax and major utility charges.

Why it matters: the presentation framed how one‑time changes and ongoing revenue shifts affect the city’s ability to fund services. Staff emphasized that the forecast process is conservative and that the city’s prior restraint — including setting aside savings during post‑COVID revenue spikes — helped avoid draconian cuts. "We were able to make such a dramatic improvement on this," the city manager said, crediting two years of 2% departmental reductions and other efficiencies.

Key details: staff reported that Mesa’s sales tax revenue has been flat across the past three fiscal years (roughly $329–331 million), a trend they said tracks statewide. Staff attributed the flat growth to a mix of factors including the elimination of taxable bases (for example, residential rental) and other state changes, not primarily to falling retail activity. The presenters also noted a $9,500,000 one‑time PD radio purchase in the current year that contributes to year‑to‑year spending volatility.

Council response and follow up: Council members pressed for clearer public‑facing explanations separating one‑time carryovers from ongoing expenditures; staff said they will revise presentation formats to highlight carryovers (about $26,000,000 reported) and onetime vs ongoing items. Council members also asked staff to run scenarios that assume no revenue increases from pending state legislation; staff said the forecast already includes a worst‑case tax conformity scenario and will be updated if the legislature adopts different provisions.

Next steps: staff outlined the public budget schedule: public meetings beginning March 4, the city manager’s proposed budget on April 2, department presentations through April, tentative budget on April 30 and final adoption actions in June‑July. The council indicated it will review department proposals and program priorities as the city manager’s proposed budget is released.

The council then acknowledged receipt of board minutes by voice vote and moved on to other agenda items.