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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LOVE’s Top Five Stories of 2023

What a year it was
We've scoured our hundred or so postings this year and selected our top five.

1. St. Patrick’s Day Tragedy
There's no doubt that this is the top story of the year. Olivia Villalobos was killed, and her sister was severely injured when struck by a car on St. Patrick's Day at the Naranja Park entrance. They were just trying to get home from the park when they were struck by the car driven by Sabrina Garcia. The case against the driver, Sabrina Garcia, is being prosecuted by the City of Tucson, and we anticipate resolution in 2024. The town had planned to make immediate significant improvements to pedestrian safety in the area, but that has been put on hold because of an $89.6 million lawsuit due to the accident. What happens regarding the settlement of the suit will be a big story in 2024.

2. Residents rail against OVCN proposed sports complex

At the beginning of the year, the Oro Valley Church of the Nazarene (OVCN) continued to press for rezoning for a huge sports complex on residential land it had purchased some years ago that is adjacent to the church on Concordia. Residents have fought hard against it. The proposal was heard by the Planning and Zoning Commission in February. It was supposed to be heard by the council after that, but that hearing was postponed. Nothing has happened since then. One might think that the proposal is dormant at this point, but we don't think so. Things like this never go away, so the residents are going to have to continue to be vigilant.

3. Marketplace approved to start with zero town funding

The Town Council "stood tall" when it rejected investing about $10 million in infrastructure to support the recreation area proposed by Town West as part of its planned revitalization of the Oro Valley Marketplace. It will be called the Oro Valley Village Center.  Instead, Town West requested, and the council approved changes to the recreation area so that the revitalization could start. 

4. Record town budget of $148 million

In June, the Town Council passed an historic budget of $148 million, driven up by the imperative to use remaining $25 million from the Naranja Park Bond and the use of $15 million in ARPA funding. Anticipating reduced funds in the future, we foresee subsequent budgets being significantly lower. A major question for 2025 will revolve around how the Town manages its budget amidst the substantial increase in infrastructure costs, coupled with the apparent decline in future construction, thereby restricting potential construction tax revenue.

5. Wilkins era begins

In April, the Town appointed Jeff Wilkins as Town Manager. His hiring was the result of a nationwide search in which the community participated. Wilkins joined the town in July. We don't know Wilkins. From afar, his style strikes us as someone who is focussed on managing the business of Oro Valley as opposed to striving to change our community.

They were many other stories from which to select

• The “Umbrella Lady”, Lydia Reis, was killed in a hit-and-run accident on Ina Road. 
• The Arizona Heroes Memorial in Naranja Park broke ground. 
• The Town of Oro Valley earned the 2023 Water Waster Award. 
• Henry Zipf, great grandson of the Pusch Family and avid LOVE reader died. 
• The town enacted and implemented a short-term rental ordinance. 
• Long-time Parks and Recreation Director Kristy Diaz-Trahan resigned in July, just two months after we celebrated her 10th anniversary with the Town. 
• Sinking houses on Moore Loop Road. 
• The town council asked for a report on golf operations. The report will include an independent audit of reported operating and financial results. 
• Staff kicked off a three year process to create the 2026 general plan. They're calling it Oro Valley's Path Forward.

We look for more exciting stuff next year.

In the meantime, it's time to kick back and relax.

We'll see you January 2 to help launch Tim Tarris’ historic flight around the globe.

Enjoy the holidays.

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$148,489,391

Town Council likely to approve record  $148.5 million budget tomorrow night
The Oro Valley Town Council will hold the second public hearing on the 2023-24 Town Manager Recommended Budget (TMRB) tomorrow night. The budget calls for $148.6 million in spending. It is the largest budget in Oro Valley history. The budget includes spending for ongoing town operations and for capital items.

2023-24 Budget is more than recommended by Interim Town Manager Cornelison
The budget that the Council will consider is $600,000 more than recommended by Interim Town Manager Cornelison. There are a more than thirty adjustments that are proposed. Most of these are changes in estimates or the movement of costs to another year. It is $785,000 more than this year’s budget.

Our previous reports have detailed TRMB spending
LOVE has previously reported on the 2023-24 TMRB spending budgets:

• TMRB Budget Overview 
• Capital Projects 
• Operations and Maintenance 
• Staffing 

These four areas comprise the bulk of budget spending. There is also spending to service debt and contingency reserves, which are funds to be designated at a later time.  LOVE also reported on learnings from the Council’s two study sessions.

Funding comes from multiple sources
Funding for this spending comes from nine sources (chart right). The main source this year is a reduction in fund balances. This reflects the drawdown of Parks Bonds Funds ($17.1million) and the use of Federal ARPA funds ($10.5 million). That means that $16.9 million is coming from funds earned by the town from “normal” sources.

Unless something dramatic happens tomorrow night, this is our final report on the Town of Oro Valley 2023-24 Budget.

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Note: The town council voted 6-0 (Nicolson absent) to approve this budget.

Parks and Recreation Projects Dominate Initial Cut At Oro Valley 2023-24 Capital Improvement Program

2023-24 Oro Valley Capital Budget-first cut- is almost $47 million

This Wednesday, the Oro Valley Town Council will study a $46.9 million capital budget for fiscal 2024. It is the largest capital budget (CIP) in Oro Valley history. Significant capital spending is being driven by the requirement to spend Parks Bond Funds and Government ARPA funds within the next few years. The result is that much of the spending is on parks and recreation and on water projects.

Parks projects are almost half of all spending

There are twenty-one proposed parks and recreation type projects that total $22.9 million. Two-thirds ($15.1m) of this spending is for continuing the buildout of Naranja Park. Even with this investment, future year capital investment plans call for continuing to add to and improve this facility with two additional fields, restrooms, and an asphalt roadway.  Other proposed parks projects for 2024 include doing the LaCanada Golf Course irrigation at a cost of $2million and adding a $1.7million elevator to the Community Center.

$12 million in proposed water related projects to add efficiency and operating flexibility

There are fifteen proposed water projects that focus on the operations and maintenance of the water utility. These are investments in the the storage and distribution of water. Generally, the cost of each project ranges from $100,000 to $200,000. These estimated total cost of these projects is $2.2 million. Generally, this cost stays the same for each of subsequent nine years. 

There is an added $10million in capital investment that appears to be for one-time projects such as the expansion of the booster station on La Canada ($3.7 million) and continued spending to bring water directly from Avra Valley to Oro Valley (NWRRDS). This will allow the town to reduce its dependence on Tucson Water for getting the town's CAP water allocation. We are guessing that the $5.4 million in ARPA funds are being used for the NWRRDS project.

Proposed spending to keep Oro Valley's roads the best in the county

Oro Valley's roads are the best in the County.. probably in the State. The proposed capital budget would spend $6.2 million on roads. A third of this is spending on the town's pavement preservation program. Also, there are several proposed pavement overlay projects, one road reconstruction and "annexation promised" road improvements at Westward Look.  There is also a budget item of $750,000 for "something" to be done at the very busy Rancho Vistoso and Woodburne Ave intersection  (perhaps a traffic light?).

Remaining capital improvement spending is primarily for public safety

There are two other areas of proposed capital spending. One area is public safety. There is proposed capital spend on an expansion of the town court office ($1.5 million) and on vehicle replacement ($1.9 million). The town court project is proposed to continue into 2025 for the same amount.  The vehicle replacement program also continues at about $2million annually for all of ten years included in the proposed CIP plan.

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