Budget commission hears FY2026 update; town projects about $4.2 million shortfall as sales-tax lags

The Oro Valley Budget and Finance Commission on April 21 received a fiscal-year-to-date financial update through February that shows the town expects general fund revenues to finish roughly 7% below budget, a shortfall the presenter estimated at about $4.2 million.

The presenter, the town finance staff member who delivered the overview, said the shortfall is being driven largely by weaker local sales-tax receipts, especially construction sales tax, though recent activity at the Oro Valley Marketplace and the Tangerine Apartments construction have shown signs of improvement. "Overall revenues in the general fund are expected to come in about 7% below budget. That's about $4,200,000," the presenter said.

The report showed revenues through February at roughly 61% of the $61.2 million revenue budget while the town is 67% of the way through the fiscal year. On the expenditure side, total uses were up year over year mainly because of transfers out to the debt service and capital funds; the presenter noted that the Town Council revised the expenditure reserve policy from 30% to 25% and that an additional $2,000,000 transfer to the capital fund has been posted in the actuals.

The presenter also shared year-end estimates showing an ending general fund balance just above $15 million, which would exceed the council's 25% reserve policy by about $2.1 million under current projections. Personnel costs were reported as up modestly because of annual pay increases and a new memorandum of understanding with the police department, but staff said vacancy savings and scaled-back additional pension contributions (the public safety pension plan is about 102% funded) should produce some offsetting savings.

On revenue details, the presenter said licenses and permits were up about $500,000 year over year but noted a classification effect: the Tangerine Apartments were budgeted as commercial permit revenue but are posting as residential (multifamily). Grants were higher largely due to timing and a deferred Homeland Security grant that posted in the current fiscal year; state grants include vehicle-theft task force funds and revenue tied to a school resource officer at Lehman Academy.

Enterprise and special funds showed mixed results. The water utility fund recorded higher sources than last year primarily because the town is drawing on a WIFA (Water Infrastructure Finance Authority) loan and some grant funding; the presenter cited a loan draw in the roughly low-millions range reflected in the current actuals. The community center fund is performing strongly on contracted operating revenues and membership fees and is now forecast to finish the year materially over budget for that fund. Stormwater fund variances were driven mainly by capital-timing changes, including a project that Pima County assumed and another contingent on a grant that is likely to carry into the next fiscal year.

A commissioner asked directly about bed-tax (lodging) collections and whether the town is seeing lower hotel occupancy. The presenter confirmed reduced occupancy rates and said staff are working with one hotel on its bed-tax remittances; the presenter gave a year-end projection for bed-tax collections at about $1.9 million versus a budgeted $2.5 million. "Yes, we are definitely seeing some reduced activity in that category," the presenter said.

Next procedural steps were also noted: the town manager's recommended budget is expected to be posted online by close of business Friday; two budget study sessions are scheduled for May 4 (5 p.m.) and May 6 (hold), the tentative budget and public hearing are set for June 3 at 6 p.m., and final adoption and a second public hearing are scheduled for June 17 at 6 p.m.

In his council liaison remarks, Mayor Winfield told the commission the town council meeting the following evening will open with executive session for the police chief's annual performance evaluation and will include presentations on broadband infrastructure and the OVPath Forward project, an IGA with the Golden Ranch Fire District related to drones, trails connectivity items and a forthcoming study session on small-animal husbandry. He also highlighted Earth Day volunteer activities organized by staff.

The commission approved the prior meeting minutes and later voted to adjourn; both motions passed without recorded opposition and the meeting was adjourned at 4:41 p.m.