Staff forecast shows budget gap by 2028 – but Council identifies unaccounted for revenue opportunitiesAt its October 1 study session on proposed fee increases and new taxes, the Oro Valley Town Council spent most of the evening discussing staff’s revised five-year financial forecast. The forecast projected that Town expenses would begin to outpace revenues in fiscal years 2028 or 2029, with reserves falling thereafter. Finance Director David Gephart said the revised forecast reflected recent actions such as the police MOU, the change in reserve policy, and the transfer of the half-cent sales tax from the Community Center Fund. “Despite those changes,” he told the Council, “operating expenditures are still outpacing income.”
Staff: Drastic cuts in service levels will be needed if new taxes and increased fees are not implemented
Staff said that “drastic measures” or reductions in services could be required if new taxes and increased fees are not implemented. They explained that the forecast already includes identified cost-saving measures and reflects options now under consideration to close the projected revenue gap.
Council members did not dispute the seriousness of the long-term forecast but questioned the tone of staff’s warning. Several said that presenting only a worst-case scenario could create unnecessary concern in the community. Vice Mayor Melanie Barrett said she preferred a more balanced view that also accounts for likely new revenues and economic activity. Councilmember Mary Murphy agreed, saying the Council needed “a realistic picture, not an alarm.” Others emphasized that residents expect transparency and perspective, not projections that appear designed to justify higher taxes.
Because the forecast does not consider future revenue growth scenarios
Under questioning, Gephart acknowledged that the forecast did not include revenues expected from several apartment projects now under construction, such as at the Oro Valley Marketplace, or from new retail and restaurant activity that will accompany them. It also omitted the Town’s efforts to reduce “retail leakage” — purchases by residents in neighboring communities — and initiatives to attract additional tourism and visitor spending. In addition, the forecast did not reflect the potential financial impact of future annexations the Town plans to pursue. Barrett said the omission made the forecast incomplete: “New housing and retail are coming online. Those will generate revenue that isn’t reflected here.” Murphy added that the forecast “needs to tell the whole story, not just the worst case.”
Council urges staff to include growth oppotunities in future forecasts
Several Councilmembers urged staff to expand future financial forecasts to reflect potential new revenues from development, tourism, and retail-retention efforts. They said they want to see what would happen if growth and revenue efforts perform as expected, noting that the conservative model alone doesn’t show residents the opportunities ahead. Including broader “what-if” scenarios, they said, would provide a more realistic picture of the Town’s fiscal future and help residents understand both the challenges and the prospects for continued growth.
Council presses for proof of efficient operations before raising taxes or fees
Several Councilmembers, including Barrett and Murphy, said they could not support recommending new taxes or higher fees until they were confident — and could assure residents — that the Town was operating as efficiently and effectively as possible. “We have to be sure we’ve done everything we can internally before asking residents to pay more,” Murphy said.
Staff believes that they have done that with cost-saving measures were already in place, such as limiting travel, delaying hires, and tightening project reviews. “We’ve been tightening the belt for several years,” Gephart said, pointing to about $3.7 million in savings since FY 2023. He added that public safety costs make up the largest share of the Town’s operating budget and “are not something we can touch” when looking for reductions.
Staff did not provide assumptions used in forecast...makes it impossible for anyone to analyze it
Staff did not present the assumptions that were used to build the five-year forecast. Without knowing these underlying factors — such as projected inflation, staffing levels, revenue growth rates, or economic conditions — it is difficult for the Council to analyze or validate the results. Forecasts are only as reliable as their assumptions, and understanding those inputs is essential to determine whether the model is too conservative or too optimistic. Without that transparency, neither the Council nor the public can fully assess whether the Town’s financial outlook accurately reflects likely future conditions.
Forecast not reviewed by Budget and Finance Commission
The revised five-year forecast was developed internally by Town staff and had not been reviewed by the Budget and Finance Commission before it was presented to the Council. While the Commission had previously discussed the proposed fees and tax options, it did not have an opportunity to vet the updated forecast or the assumptions behind it. Independent review by the Commission would have allowed for additional public transparency and a more thorough evaluation of the forecast’s credibility.
Next steps
Staff will continue to refine the analysis and present additional information when the Council takes up the proposed taxes and fees later this month. Those actions — including possible adoption of new use, telecommunications, and commercial-rental taxes and approval of updated parks-and-recreation and stormwater fees — are scheduled for the Council’s October 15 meeting.
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