Wednesday, May 20, 2015

Budget 2015-16; Oro Valley Planned Spending Exceeds Planned Revenues by 4.5%. Spend Up 28% in 2 years

Tonight, the Oro Valley Town Council will hold a public hearing on the 2015-16 town manager's recommended budget ("TMRB") of about $120mil.

Oro Valley's budget is up 28% in two years
The TMRB is $119.7 million. This is 12% more than this year's budget of $107mil. That budget was an increase of 14% from the prior year. In 2 years, the budget has grown 28%. The Oro Valley budget averaged about $95 million from 2012-2014.

The budget is not balanced from a revenue minus spending perspective
The town considers a budget to be balanced when the initial cash balance plus revenues equals the ending cash balance plus spending. That calculation includes both the opening and closing cash balance.

"The Town has historically included all resources available to set our spending cap to ensure that we have these funds budgeted in case Town Council authorizes their use during the year. In addition, by budgeting all sources, including fund balance, we avoid possible claims that we are 'hiding' money'." (Source: Oro Valley Communications Administrator Misti Nowak)

The TMRB is not balanced from a recommended revenue minus expenditure perspective. The recommended expenditure budget is about $84 million. This is $3.4 million more than the anticipated revenue budget.

Analyzing Oro Valley's budget in complicated 

Analyzing the Oro Valley proposed budget is not easy. This is because Oro Valley has 24 different funds. Each fund has its own budget.

One has to analyze the recommended budgets of a number of funds in order to assess town operations (see right panel).

Complicated? You bet. Here's our quick peek.

There are 5 major sources of Oro Valley revenues.
Revenues from sales and other taxes, the State of Arizona, charges for services, grants, and water sales are 83% of Oro Valley's TMRB revenues.

Budgeted revenues are based on the assumption of "modest economic growth." The budget anticipates modest commercial growth: "We expect this to be very slow in the short term and gradually increase as more homes are added to the community."(TMRB p i and ii)

The revenue budget was adjusted downward after the issuance of the TMRB because one of two significant projects included in making this budget estimate, the new K-5 elementary school in Rancho Vistoso, was deferred to next year by the Amphi School District. This reduced TMRB budgeted revenues by $420,000.

Spending is primarily for operations
From an overall perspective, there are four components of Oro Valley's planned spending. Day-to-day operations are two-thirds of this. Capital improvements are a bit over a quarter. The rest is to pay debt.

Oro Valley continues to make a major investment in its town employees
Last year, the town granted one-time pay increase adjustments plus a merit compensation increase to town employees.

"The FY 2015/16 Recommended Budget continues the commitment to recognize the efforts of our Town employees with capacity included of approximately $580,000 for public safety employee step increases and up to a 4% performance merit increase for non-public safety employees."

Town Manager Caton states in the TMRB that these increases are necessary in order to keep employee pay competitive. Caton asserts that increases avoid the employee turnover cost of hiring and training new employees.

The community center has an $8 million budget impact
"In 2015/16, the largest addition to this area is the Community and Recreation Center. This is a new division within the Parks and Recreation Department and adds over $8 million in operational and capital expenses and accompanying revenues of over $7.4 million, including the 0.5% dedicated sales tax revenues of $2 million. These operations will be accounted for in a new fund, the Community Center and Golf Fund." (TMRB p vi)

Without the community center, the TMRB would be about $112mil. The increase over prior year would be about $5mil. The percent increase would be 4.5%.

Want to learn more about the TMRM? Access it here.

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