Wednesday, May 29, 2024

Town's Financial Report Through March: Rising Costs a Challenge

"I'm pleased to be presenting our financial update through March. Things are still going quite well."
Thus began Oro Valley Deputy Finance Director Wendy Gomez' update on 2024 nine month financial results. Gomez presented the update to the town's Budget and Finance Commission last week.  Her update, provided on a fund by fund basis, had four themes.

Notable revenue growth and stability
The town has experienced notable revenue growth and stability, with significant increases in state shared revenue and local sales tax. The general fund has seen a 7% rise in revenue sources over the prior year, largely due to an increased allocation for state shared income taxes. Additionally, despite a budgeted decline, the local sales tax has grown by about 0.5% compared to the previous fiscal year. This consistent performance in revenue ensures that the town can continue to meet its financial obligations and support essential services without facing unexpected shortfalls.

Financial discipline in spending
In the general fund, personnel vacancy savings have resulted in lower-than-expected personnel costs, effectively managing human resources expenses. Similarly, in the highway fund, operations and maintenance expenditures have been kept below budgeted amounts, reflecting conservative budgeting and spending. 

While coping with rising capital and maintenance costs
The town is managing rising capital and maintenance costs, which have been increasing due to various factors. In the highway fund, higher costs in street maintenance and field supplies have driven up overall expenditures, reflecting the growing expense of maintaining infrastructure. Similarly, the community center fund has faced rising utility costs, driven by rate hikes and changing climate conditions. 

These increasing costs highlight the need for careful planning and potential adjustments in funding to maintain the town's infrastructure and facilities adequately.

Has resulted in better than anticipated balances in some funds

Overall, fund balance management has allowed the town to maintain strong financial health and stability. In the general fund, higher-than-expected revenue performance has resulted in the use of only $2.8 million of the fund balance, significantly less than the budgeted $5.3 million. This approach ensures that a robust fund balance is preserved for future needs. Likewise, the community center fund is projected to add about $460,000 to the fund balance, ending the fiscal year just under $1.5 million. This ending fund balance provides a bit of a financial cushion.

Up next: Report to council
Gomez will present these nine month results to the town council at next week's June 3 council meeting. Staff will also be presenting the tentative budget at that time.
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