Oro Valley budget panel hears unaudited report showing multimillion-dollar shortfall; December meeting canceled

The Oro Valley Budget and Finance Commission on Nov. 18 heard an unaudited financial update from town staff showing weaker-than-expected revenue collections through the first quarter and a revised forecast that will draw on reserves. Town staff said the shortfall is driven primarily by underperforming local sales taxes and has prompted a downward revision of year-end revenue estimates.

"The information being presented tonight is unaudited and subject to change," said Mr. Gephart, the town's staff liaison, as he opened the finance presentation. He told commissioners total revenues are lower than the prior fiscal year by about $535,000 and that collections overall are at roughly 21% of budget through the first quarter, compared with the roughly 25% the town would normally expect at this point. "We are forecasting a use of fund balance of $2,670,000 at year end, exceeding our budgeted use of fund balance of $625,000 by a little over $2,000,000," he said.

Why it matters: Sales tax is Oro Valley's largest operating revenue source, and a sustained shortfall has implications for both operating services and capital plans. Gephart highlighted that construction sales tax in particular performed worse than last year—down about $650,000 through the quarter—and staff now project a $1.46 million year-end shortfall for that line. Overall general-fund year-end revenue estimates were revised to about $29.67 million, roughly $2.8 million less than budget.

The presentation broke the town's finances into fund-level summaries. Mr. Gephart said departments generally remained under budget through the quarter but transfers out and higher personnel costs increased outlays versus the prior year. He described the capital fund impact of the recently authorized purchase of the new police headquarters, which helped drive a net use of capital resources in the quarter. He also reported stronger results in some enterprise areas: water sales were up about $598,000 (12%) and golf operations produced higher-than-expected revenue, with staff projecting roughly $6.55 million in golf revenue for the year—about $930,000 over budget—after rounds rose roughly 7%.

Commissioners pressed staff on several points. Commissioner Mason asked about a decline in utility tax collections despite higher consumption; Mr. Gephart said staff were "monitoring the category" and had not yet concluded on a cause. Commissioners also raised bed-tax collection issues and requested follow-up. Vice Chair Carlsberg and other members discussed the council-approved effort to add three new tax categories; Mr. Gephart said the measure is intended to diversify revenues but would not materially improve the current fiscal-year position.

On investments, Mr. Gephart said the town has been earning higher yields as interest rates rise and that staff extended maturities from three to five years to lock in better returns. He cautioned, however, that lower cash balances and the police headquarters purchase will reduce reserves and must be balanced against higher yields.

Votes at a glance: - Approval of Oct. 21, 2025 meeting minutes: motion by Commissioner Carlsberg, second by Commissioner Mason — passed. - Cancel Dec. 16, 2025 Budget and Finance Commission meeting: motion by Commissioner Mason, second by Commissioner Carlsberg — passed. - Adjournment at 4:47 p.m.: motion by Commissioner Okezie, second by Commissioner Carlsberg — passed.

Before adjourning, commissioners and Mayor Winfield thanked Commissioner Mike Mason for his service; the mayor also reminded commissioners of a volunteer appreciation banquet on Dec. 11 at the El Conquistador.

Next steps: Staff said it will continue to refine year-end estimates, investigate the utility- and bed-tax trends called out by commissioners, and return with updates in subsequent reports and in the council's packet when requests for new tax categories return to council for consideration.