May 2025 Financial Update: Larger than budgeted fund balances expected at year end

Bottom Line: Larger than budgeted fund balances expected at year end

All six of the Town’s major funds are estimates to end the fiscal year with balances greater than budgeted. This conclusion is based on a staff presentation to the town's Budget and Finance Commission

in August. The estimates are based on fund balance positions as of May.   

Delayed spending and savings drives most reported results

A larger than planned fund ending fund balance does not mean the Town is operating more efficiently or being more fiscally responsible. This is because the cash balances also reflect the timing of receiving and paying funds. Because the Town uses cash basis accounting, lower spending may simply mean that a project or service has been completed but payment has not yet been made; or that work has not yet started. For example, some capital projects in the Capital Fund have rolled into the next fiscal year, and certain road preservation projects in the Highway Fund and equipment purchases in the Water Utility Fund are being delayed.

General Fund: Lower revenues and expenditures

The General Fund pays for most day-to-day Town operations, excluding spending by the Water Department and the Stormwater Utility Fund. It also provides to other  funds, such as the Capital Fund and the Community Center Fund. Its performance therefore matters. General Fund revenues are down about 4% year over year, driven mainly by lower-than-expected construction sales tax revenues. This is despite licenses and permits exceeding the annual budget, with 106 single-family permits issued through May. Expenditures are tracking under budget due to unfilled positions and operations and maintenance savings. The Town now expects to use about $2.3 million of fund balance instead of the planned $4.1 million, leaving reserves about $4.4 million above the 30% Council policy threshold.

Highway Fund: Delayed road projects boost fund balance
Revenues in the Highway Fund are at 83% of budget. Highway User Revenue Fund receipts are slightly below plan, but higher right-of-way permit fees and insurance recoveries help offset that shortfall. The fund also receives quarterly transfers from the Capital Fund, totaling $4 million for the year. On the spending side, savings are expected in personnel, street and traffic signal maintenance, and several capital projects. Equipment and road work came in under budget, including the Magee Road and La Cañada Drive mill and overlay projects. The Town Council also shifted funds from a planned truck purchase to a less expensive crack seal machine, producing additional savings. Instead of a $365,000 change in fund balance as budgeted, the fund is now projected to add about $870,000 by year-end. 

Community Center Fund: Better than planned revenues balanced, somewhat, by greater than planned spending
Revenues in the Community Center Fund are ahead of budget, reaching 105%. Golf activity is strong, with 111,115 rounds played through May, an increase of 8.2% from last year. Town revenues from dues, recreation programs, and rentals are also higher than expected. Expenses are running over budget due to higher labor, utility, and credit card costs, as well as increased personnel costs. Even so, instead of using $115,000 from the Community Center Fund balance as planned, the fund is now projected to add about $750,000, ending the year with a balance of $2.6 million. These results include a transfer from the General Fund of $3.59 million, projected to reach $3.9 million by year-end (June). The Community Center Fund also transferred $1.72 million to cover debt service on the $25 million Parks and Recreation bond.”

Capital Fund: Rolling some projects into next year
Revenues in the Capital Fund are at 85% of budget through May. These include a $1 million state grant for the Naranja Park pump track and skatepark, $5.35 million in transfers from the General Fund, and higher-than-expected interest earnings. On the spending side, only $4.5 million of the $10.3 million budgeted for capital outlays has been used, as several projects will roll into the next fiscal year. Transfers out include funding for road work into the Highway Fund and $2.2 million set aside for the Vistoso Trails Nature Preserve and transit vehicles in the Grants Fund. Instead of using $5 million of fund balance as planned, the fund is now projected to use only about $400,000, leaving an ending balance of $11.7 million. 

Water Utility Funds: Increases revenue...some cost savings
Revenues in the Water Utility Fund are expected to slightly exceed budget, helped by reclaimed water sales, service fees, and higher interest earnings. Loan proceeds total about $7.2 million compared to $8 million budgeted. On the expense side, savings are coming from staff vacancies, lower costs for CAP water deliveries, and reduced system maintenance. Capital outlays are also running below plan. Debt service payments were made as scheduled, and transfers are being used to fund regional water projects such as the Northwest Recharge, Recovery, and Delivery System. Instead of the $2.3 million increase that was budgeted, the fund is now projected to grow by about $6.2 million, ending the year with a balance of $15.5 million.

Stormwater Utility Fund: Spending timing impacts fund balance
Revenues in the Stormwater Utility Fund are on track, with fee collections near budget and interest earnings well above expectations. A FEMA grant for $210,000 for the Sierra Wash project will roll into the next fiscal year. On the expense side, savings are coming from vacancies and lower costs for vehicle and equipment repairs, field supplies, and gasoline. The Sierra Wash project had a budget of $735,000 but is now estimated to cost about $380,000 by year-end . Instead of using $432,000 of fund balance as budgeted, the fund is expected to use only about $127,000, ending the year with a balance of $936,000.

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Town Financial Results For First Six Month Of Year "Basically" On Track To Budget

Oro Valley reports financial results for first half of fiscal year 2025
The Town of Oro Valley’s financial update for the first six months of fiscal year 2025 revealed mixed results, with revenues and expenditures tracking close to budget expectations but notable shifts in key revenue sources. Finance Director Wendy Gomez presented the update to the town council last week. Gomez highlighted variances and discussing the town’s financial position. 

General fund revenues down a bit from last year
The General Fund is the fund that provides revenues for town operations. General Fun revenues for the first six months of this fiscal year were at  down approximately $1.7 million (6%) from last year. A decline in state-shared revenues and local sales tax collections contributed to this decrease. Local sales tax was down by 4% (approximately $500,000), a rare trend for the town. That drop was primarily attributed to a slowdown in residential and commercial construction activity, while retail sales tax saw modest growth of less than 2%, compared to the typical 4%. Despite these declines, overall General Fund revenues remain on track to meet budget projections.

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General fund spending down a bit from last year

On the expenditure side, General Fund spending was showed a $1.2 million (4%) decrease from last year. The town had budgeted for a 2.4% decline in spending, largely due to reduced transfers to the Capital Fund. Personnel costs remained within budget, with savings of about $970,000, driven by staff vacancies and turnover. Operational and maintenance (O&M) spending was expected to come in about $400,000 under budget. 

Net Result: The projected general fund balance at year-end is expected to be $19.6 million, exceeding the Council’s 30% cash reserve policy by $4.3 million.

State-shared revenues discussion
Town Council members raised questions about state-shared revenues, which had seen fluctuations  due to changes in state income tax policies. The state increased the town’s share of revenue from 15% to 18% to offset a reduction in tax rates. Vice Mayor Barrett asked for clarification on how these changes affected Oro Valley’s overall revenue. Staff explained that state shared revenues temporarily spiked in last fiscal year. This was due to the higher allocation.  The overall impact of the tax rate reductions has now stabilized the town’s growth in this category to a steady 2% per year. The town is projected to collect $10.3 million in state-shared revenues this year, about $1.5 million higher than in FY 2023 but lower than the peak seen in FY 2024.

Community Center Fund on track
Revenues in the Community Center Fund increased by 4% year-over-year, largely due to higher membership fees and golf activity. Golf rounds were up 8.4% from last year and 9.8% above budget. Town-operated recreation programs also saw a 10% increase in revenue, with membership trends remaining strong. 

Expenditures in this fund are projected to exceed budget by 5%, primarily due to higher water costs and labor expenses. The added revenues are expected to fully offset these overages. The Community Center Fund is projected to end the year with a positive balance of $160,000, bringing total reserves to just under $2 million.

Capital fund and infrastructure spending on track
The Capital Fund is funded by the operating funds and grants. For the first six months of the year, results are progressing as planned, with $2.5 million in capital outlay already spent, and additional project spending expected in the latter half of the fiscal year. Funding for major projects includes a pass-through grant from Arizona State Parks for the Naranja Park pump track and skate park, as well as allocations for the Vistoso Trails Nature Preserve and transit vehicle grants. The Capital Fund is expected to end the year with a balance of $11.7 million.

Water fund and utility revenues on track
Water fund revenues were slightly below budget by 1.2%, as water consumption has been lower than anticipated despite the lack of rain in the fall. This surprised Mayor Winfield, who noted that he expected higher usage due to dry conditions. Staff reported that conservation efforts may be a contributing factor. The town’s interest earnings in the Water Fund were higher than expected, helping offset the revenue shortfall.

Fund Transfers...Always confuse the discussion

One of the challenges in interpreting the town’s financial results is the the town transfers money between funds. This is because the funds do not all operate independently. For example, in the first six months of the year, the town made several key fund transfers. The General Fund transferred money to the Capital Fund on a quarterly basis, helping finance projects such as the Naranja Park pump track and skate park. The Capital Fund relies heavily on fund transfers from the General Fund as it does not have its own revenue source.  Additionally, a reduced transfer to the Debt Service Fund was noted, as strong interest earnings allowed the town to use fund balance instead of relying on General Fund contributions. The Water Fund transferred money to its Impact Fee Fund to support groundwater preservation projects.  At the end of the fiscal year, the town plans to transfer funds from the general fund to the Grants Fund to cover the Vistoso Trails Nature Preserve and a local match for transit vehicle grants. These transfers are subject to the actual grant awards the town receives. This means the funds will only be transferred if the grants are secured.  

Internal fund transfers play a crucial role in balancing the town’s finances but make it difficult for an outsider or council member to understand the town's true financial position.

Oro Valley’s financial outlook: Stable
Overall, Oro Valley’s finances remain stable, with most funds tracking within budget expectations. While declines in construction sales tax and state-shared revenue adjustments have impacted overall revenue trends, expenditure savings and growth in other revenue categories have helped maintain the town’s strong financial position. 
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It's a Wrap! Top Stories of 2024

Top five stories of 2024

2024 was a busy year in Oro Valley. Here us out cut at the top five stories. 

1. Celebrating 50 years of community and growth
The Town of Oro Valley commemorated its 50th anniversary throughout 2024 with a series of events that highlighted the community’s history and spirit. The celebrations included a vibrant parade on April 6, featuring over 90 participants from local schools, community groups, and businesses, along with a spectacular fireworks display on April 13 at James D. Kriegh Park. Additionally, on April 27, the town hosted the “50 Trees for 50 Years” community tree planting event, where residents gathered to plant 50 trees across four locations, enhancing the town’s green spaces. The Oro Valley Chamber of Commerce also launched the “50 Businesses for 50 Years” Shop OV campaign, highlighting 50 local businesses throughout the year to encourage community support and economic growth.

2. Robb and Murphy elected to council
In the 2024 Oro Valley Town Council election, two new council members were elected by a vast majority of votes, reflecting strong community support. Elizabeth Robb, a local business owner, and Mary Murphy, a longtime resident and community advocate, bring fresh perspectives to the council. Their addition is expected to influence upcoming decisions on key community issues, including development projects, public services, and fiscal policies. Residents anticipate that the new council members will prioritize transparency and community engagement, ensuring that the voices of Oro Valley citizens are well-represented in the town’s governance.

3. The OVCN’s onslaught on Oro Valley’s historic neighborhood took a new turn
The Oro Valley Church of the Nazarene (OVCN) put its plan to build a massive sports complex on hold, at least for the moment. However, that plan is not dead; it’s simply on hiatus. Instead, they are now pursuing the addition of new facilities to their campus, substantially increasing their footprint. The latest effort is to ask permission for buildings of greater height than currently exists. As we wrote yesterday, it’s a continuing cycle of misery for the residents. This saga will continue into 2025.

4. Another year of nothing for the Vistoso Trails Nature Preserve
The Town Council did lots of talking about the Vistoso Trails Nature Preserve. There was much discussion about plans to do something. The council even agreed to “do something” only to learn that one of those plans — repurposing the abandoned pond into a “desert garden” — was an unattractive alternative. Residents noticed this, and the council temporarily paused the approved plan to take another look at the water feature instead of a desert garden. More on this in 2025. In the meantime, the preserve looks like an abandoned golf course.

5. "OVPathForward" moves forward big time
The town made progress this year in creating its 2026 General Plan, called “OV Path Forward.” A draft vision and guiding principles were developed with the input of thousands of residents. The next step is to flesh out the details around these principles. Working groups will tackle this in 2025.

Honorable mention

There were some other notable happenings this year:

• The fourth annual Rockin’4Heroes concert was a huge success.
• The town implemented an 8.3% increase in water rates, while continuing to use thousands of gallons of water on recreation facilities, earning the LOVE Water Waster Award for the fourth time.
• The town council adopted a $151.2 million budget.
• Oro Valley celebrated the opening of Naranja Park.
• The Arizona Heroes Memorial at the park was dedicated.
• The town ended its contract with Visit Tucson and took over its own destination marketing program.
• The Town Council rejected the tiny homes project in Rancho Vistoso.

And on a sad note
Rick Messina, a well-liked groundskeeper at the Pusch Ridge Golf Course, tragically died from a bee attack in July. Friends of Pusch Ridge Golf raised almost $10,000 to help Rick’s parents.

It was indeed a busy year in Oro Valley.

We suspect that 2025 will be just as busy.

Happy holidays to all.
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Hidden Impact: Why Oro Valley Residents Are Concerned About a Fuel Station Renovation

Major renovation of town vehicle fuel station
This year’s capital budget includes a significant $450,000 renovation for the fuel station located at 680 West Calle Concordia, home to the public works facilities. According to town staff, the renovation is essential to modernize aging infrastructure that supports over 17,000 fuel transactions annually. The project aims to increase fuel storage capacity, replace severely rusted fuel tanks, and enhance efficiency by enabling more than one vehicle to refuel simultaneously.

Impacts local residents
Despite the scale of this project, Oro Valley Town staff decided not to involve local residents in any discussions. This decision has raised concerns, especially since the town typically holds an annual meeting to review any significant changes or issues within the community. In a recent conversation with Town staff, resident Ed Clary inquired if there were any major topics to discuss this year. Town officials responded with a resounding "no," a statement that now seems misleading given the planned renovation.

Breaking tradition of community involvement
Clary pointed out that since 2019, residents have regularly met with the Town to discuss concerns and future plans. These meetings were established to ensure transparent communication and allow time for any necessary adjustments within the town’s budgetary cycle. This year, residents suggested skipping the meeting, trusting there were no pressing matters. Town staff agreed, claiming no significant items were on the agenda. However, it’s clear that the renovation of the fuel station was not considered important enough to warrant discussion with the community.

Known to residents only after the fact
Upon discovering the renovation plans, Clary requested detailed information from the staff and was provided with a 42-page schematic of the project. Unfazed, he reviewed the plans and uncovered several key details: the construction of a new second entrance to the facility off Calle El Milagro, a residential street, the removal of screening vegetation on the west side to accommodate this entrance, and the construction of drainage culverts. Clary expressed concern over these changes, particularly given the area’s existing drainage issues. The size, scope, and impact of the project were far greater than residents had anticipated.

A difference in opinion or a communication breakdown?
Town staff may have viewed these changes as modest, not warranting a discussion with residents. However, Clary and other residents feel differently. “Honestly, we're perplexed that word came back that there were no issues to discuss because, in the opinion of residents, it both could and should have been discussed in our regular meeting much earlier in the process,” Clary stated during the council meeting.

Next Steps: Mayor Intervenes
In response to the concerns raised, Mayor Winfield instructed town officials to hold a meeting with the residents of 680 West Calle Concordia to discuss the project. This step is a crucial move towards restoring trust and ensuring that future projects involve the community from the outset. The hope is that this meeting will address the residents' concerns and lead to a more transparent planning process moving forward.
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Bits and Pieces

Messina GoFundMe campaign reaching goal… You can help put it over the top

Last Friday we reported that groundskeeper Rick Messina succumbed to injuries sustained from a bee atttack at the Pusch Ridge Golf Course; and that Friends of Pusch Ridge Golf started a GoFundMe campaign to help pay related expenses for Rick’s parents. The fund has $9,678 raised from 116 donations. The goal is $10,000. You can help put it over the top by contributing here.

Shocking but True: Budget and Finance Commission played no role in the 2025 budget yet it was supposed to do so 

The town’s Budget and Finance Commission played no role in the fiscal 2025 budgeting process. Although they received documents periodically, they did not discuss, analyze or comment on them. According to Finance Director David Gephart, speaking to the commission at the end of June: “I feel like we really haven’t provided you with an opportunity to go through a formal presentation on the budget and allowed you the opportunity to ask questions or provide comment.” This, despite the fact that one of the missions are the commission is to do just that.

“The Budget and Finance Commission is responsible for providing assessment and recommendations in regards to the town manager’s recommended budget and 10-Year Capital Improvement Plan.” (source) . The commission did review three policy changes, but we wonder: What is the purpose of this commission if it doesn’t get involved in the most important aspect of the town’s finances? 

Bohen: The “fat” is in the capital project budget
We noted Tuesday that the town council passed a $151.2 million budget for fiscal 2025. We also noted at that time that Vice Mayor Barrett attempted to demonstrate that the council was at least trying to control spending when she introduced a measure to reduce the across-the-board staff pay increases from 4% to 3%. Later in that same discussion, Council Member Bohen gave his opinion on where the fat is in the budget. According to Bohen, it's in the capital projects. He observed that it's very hard to get straight answers from Town staff on what projects are actually going to cost. We included a quote in the panel at right. 

Oro Valley Residents Advocate for Performing Arts Center to Boost Culture and Economy 
At the last town council meeting, Oro Valley residents and other community members advocated for the establishment of a performing arts center in the town. They emphasized that such a center would not only expand the town’s amenities but also support local arts organizations, provide a venue for youth theater programs, and serve as a vibrant community gathering place. The speakers highlighted the cultural and economic benefits, including increased tourism, enhanced local business revenue, and greater opportunities for residents to engage in the arts. They urged the council to consider this project as a valuable addition to Oro Valley’s growth and development, reflecting the community’s strong support for the arts and desire for enriched cultural experiences.

Oro Valley’s Tourism Transformation: A New Focus on Business and Sports Events 

In a strategic shift, Oro Valley is redefining its tourism approach by prioritizing business and sports event travel, significantly impacting the local economy. Led by the Community and Economic Development (CED) Department, the town is enhancing its group bookings strategy for major resorts like El Conquistador Tucson and Westward Look. Now functioning as the official Destination Marketing Organization (DMO), Oro Valley has already identified over 600 potential event prospects and developed comprehensive plans to support extended stays and return visits. These efforts include collaboration with local stakeholders and leveraging grant funding opportunities, marking a new era of tourism for the town. Read more about what is behind this transformation here! (Source) 

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Greene Helps Make Town Staff 4% Pay Raise A Reality, Ignoring Financial Warnings...Failing To Participate In Discussion

Town Staff Gets Big Pay Increase 
This year’s budget includes a whopping 4% increase across the board for all employees. That’s the highest level ever given, in a year in which the council was warned that revenues are going to be tight in the future. 

Greene, Joyce-Ivey, Solomon and Winfield supported big increase
That increase was explicitly approved by a slim council majority at the June 19 council meeting, a meeting in which the council approved the $151.2 million fiscal 2025 Budget. Vice-Mayor Barrett had argued in favor of the historical 3% increase.  Council Members Bohen and Nicolson voiced their support for that.

Town “Spreads the Peanut Butter” when it comes to pay raises... No performance based awards...No incentive to get better
When it comes to staff pay raises, Oro Valley spreads the peanut butter! Everybody gets the same percent increase regardless of their performance. 

This contrasts with private sector practice where, as noted by Vice Mayor Barrett and Council Member Bohen, employees are paid based on their performance. As Council Member Nicolson noted at that meeting, who works in the public sector under the across-the-board pay philosophy: “I get the same raises, still same pay, not really a whole lot of incentive to improve.”

Barrett: Individual performance should be individually awarded
“I think it’s important to have some performance-based measures because I think that helps encourage our good employees, and we can help identify the employees that are most likely flight risks. That’s something that’s done regularly throughout all of the private sector and efficient places in other sectors as well,” said Vice Mayor Barrett.

Votava: No. That might make some people unhappy
Town Human Resource Director Andy Votava does not think that is a good idea: “So, in my mind, I don’t think we’re well-equipped to implement a pay-for-performance system because the danger or the hazard is that if we don’t do it well, some employees may take issue with that. Potentially, anybody can file a lawsuit, but it could lead to complaints.” 

Greene supported this massive increase in spending though he failed to even participate in the discussion

Mo Greene, who is running for reelection, claims to be fiscally responsible. However, his actions, including his decision to support this 4% across-the-board pay raise despite looming financial constraints, demonstrate the opposite. He was so disinterested in the conversation on the pay increase that he did not participate in it. Not one word!

Indeed, Greene's disregard for fiscal responsibility was evident when, at the Sun City forum, he was asked how he would demonstrate fiscal responsibility. He merely echoed Council Member Solomon's statement in a May council meeting: "We need to separate our wants from our needs." Greene then referenced something he did 20 years ago while working the New England Journal of Medicine, without citing any actions he has taken on the council in the past four years. That's because there were no examples to cite. 

Next Tuesday's election is a clear opportunity for voters to hold him accountable for his demonstrated lack of fiscal responsibility. 

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(Source: June 19, 2024 Oro Valley Town Council Meeting, Item 5)

Council To Consider $151.2 Spending Limit For 2025 Tonight

$151.2 million expenditure limit 
Tonight, the Town Council will approve an expenditure limitation of $151,210,253 for fiscal 2025. This is the first step in a two-part process for approving the budget for the year. The second part, where the Town approves the actual budget, will take place in two weeks.

This limit is the only absolute control council has over spending
The expenditure limitation is the only control the Town Council has over spending. This limitation ensures that overall spending is kept in check, even though individual budget items may not see significant changes through council discussions. Discussions around individual budget items, such as those conducted in council study sessions on May 8 and 9, are interesting; however, these discussions rarely result in significant changes to the spending proposed by town staff. This has been evident in this year’s budget process to date.

$5.2 Million less than what the Town Manager wanted... achieved by reducing "contingency reserves"
The expenditure limitation is $5.2 million less than the amount requested in the town manager's recommended budget. This difference stems from a reduction in what the town calls contingency reserves. Contingency reserves are funds set aside in the budget to cover unexpected expenses and unforeseen events.  They can be set at any level desired. The total included in the budget for these reserves now is $8.2 million, with $6.0 million of that amount under the control of the town manager in the "unassigned" and "administration" departments.

Key budget adjustment is in the water department contingency reserve
A notable change occurred when the town reduced the Water Fund by $11.5 million after increasing spending on the NWWRDS project by $6.1 million. Other than this, there is only a minor difference between what was recommended by the town manager for fiscal 2025 and what is being proposed by the Town Council, as presented in the detailed budget information provided.

Want to learn more about the 2025 budget?

Read our analyses of the Town Manager Recommended Budget. It is the same budget as is currently proposed with the exception of the items noted in this article.

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