Oro Valley budget panel elects new chair, hears clean audit and warns of 9% sales-tax shortfall

Oro Valley — The Budget & Finance Commission on Jan. 20 elected Vice Chair Carlsberg to serve as chair for 2026 and appointed Chair Garland as vice chair, heard that external auditors issued a clean opinion on the town's FY2024–25 financial statements, and received a financial update that projects a roughly $2.8 million shortfall in local sales-tax revenue.

Brian Hammerly, lead audit partner with Baker Tilly, told the commission the firm issued an unmodified — or "clean" — opinion on the town's annual comprehensive financial report. "You received what's called an unmodified opinion, which really just means you receive a clean opinion on your financial statements," Hammerly said, adding the firm issued a clean Yellow Book report on compliance and identified no material weaknesses.

Town staff and the auditor also reported no findings in the federal single audit for a major program this year (COVID‑19 State and Local Fiscal Recovery Funds), meaning federal auditors did not identify reportable compliance problems in the sampled work.

CFO Mr. Gephardt highlighted the pension picture as a positive. "We did end the year 101% funded for our Tier 1 and Tier 2 members," he said, noting the town had briefly missed a final-quarter payment that was posted after the fiscal-year cutoff but nonetheless finished the year fully funded.

Finance staff (Miss Gosemisk) presented preliminary, unaudited numbers through November 2025 and flagged revenue pressure in the general fund: year‑to‑date revenues were about $22.1 million (down roughly 1% year over year), while staff projects the town will realize about $29.7 million in local sales-tax receipts against a budgeted $32.5 million — a gap of about $2.8 million, or roughly 9% of the sales-tax line.

"Local sales tax revenues overall in the general fund are expected to fall short of budget expectations by about $2,800,000, or 9%," Miss Gosemisk said. She attributed the shortfall primarily to weak construction sales tax collections and modest softness in utility and restaurant taxes.

Commissioners and staff discussed timing and recovery expectations tied to local development. Staff said expected projects — including the Oro Valley Marketplace apartments and ongoing hotel discussions — could improve receipts, but stressed that timing is uncertain and some construction‑tax receipts are one-time inflows tied to individual projects.

To address the shortfall, CFO Gephardt outlined a mix of near‑term and budget-year responses: continuing to limit operational spending, holding open vacancies longer, directing departments to reduce O&M spending, pausing excess pension prepayments while the PSPRS plan shows an asset position, and recommending significant capital‑project deferrals in the upcoming CIP recommendation to council.

On new taxes and fees, commission members discussed the council's recent action on several proposals. Staff said the town recommended implementing use, telecommunications and commercial rent taxes with a July 1 start for any that pass and that, as implemented with the Arizona Department of Revenue, collections would first be expected after implementation quarters settle.

Procedural business at the start of the meeting included approval of the Nov. 18, 2025 minutes (motion passed by voice vote) and the commission elections: a motion to appoint Vice Chair Carlsberg as chair passed, and a motion to appoint Chair Garland as vice chair also passed by voice vote.

Mayor Windville addressed the commission near the close of the meeting, thanked members for their work on fee and tax recommendations and announced an open council/leadership strategic-planning session scheduled for the next day from 9 a.m. to 2 p.m.

The commission adjourned at 5:07 p.m. The commission and staff said they will carry these budget issues into the formal budget process and will present midyear and year‑end audited results once Baker Tilly's audit is finalized and posted.