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Midyear report: Oro Valley sees sales‑tax shortfall, updates year‑end forecasts
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Summary
CFO Dave Gephardt reported that total revenues are up slightly year‑over‑year but overall local sales taxes are underperforming compared with the budget, driving a projected general‑fund shortfall; staff outlined fund‑by‑fund impacts and potential management steps.
At the March 4 Oro Valley Town Council meeting, Chief Financial Officer Dave Gephardt presented the town’s unaudited midyear financial report for the first half of fiscal 2026 (through December 2025), describing variances across multiple funds and updated year‑end estimates.
Gephardt said total revenue collections were about $400,000 ahead of the prior fiscal year but that overall revenues were at 45 percent of budget at midyear — short of the 50 percent benchmark — creating a midyear shortfall of roughly $3.24 million largely driven by weaker local sales tax collections. He highlighted construction sales tax as the primary underperformer (projected a $2.96 million shortfall for the year), while retail, remote‑seller and restaurant taxes were below budget but retail and remote seller categories have shown resilience.
The CFO reviewed the general fund, highway fund, community center/golf operations, capital fund, water utility and stormwater utility. Notable points included: permit‑fee collections tied to OV Marketplace apartments outpaced prior year expectations (licenses and permits at 71 percent of budget); golf contractor revenues were strong and are projected to produce a surplus; transfers out and higher personnel costs contributed to higher outlays; and the capital fund reflected the new police headquarters purchase and related transfers.
For the water utility, Gephardt said water sales rose about $505,000 (roughly 5 percent) due to higher consumption and rate changes after a dry season, but the utility is forecasting a use of fund balance that the utilities presentation later addressed in more detail.
Council members asked for clearer presentation breakdowns separating construction sales tax from the retail categories and for more frequent or clearer comparisons (for example showing the percentage of fiscal year elapsed alongside December figures). Gephardt agreed to incorporate those clarifications in future reports and to discuss possible downward revenue adjustments and expenditure constraints if necessary. He said the town expects to remain above the 25 percent reserve policy based on current projections but acknowledged risk and uncertainty.
The midyear report prompted council questions about timing of collections (permits and impact fees are front‑loaded while construction sales tax collects later) and the need for clearer monthly reporting and segmentation of local sales tax categories for public understanding.
