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Home My WebLink AboutPackets - Council Packets (1807)Town Council Meeting Regular Session June 7, 2023 Town Council Meeting Announcements Upcoming meetings Meetings are subject to change. Check the Town website for meeting status. Water Utility Commission – CANCELED June 12 at 5 p.m. Hopi Conference Room Stormwater Utility Commission – CANCELED June 15 at 4 p.m. Hopi Conference Room Budget and Finance Commission Regular Session June 20 at 4 p.m. Council Chambers Town Council Regular Session June 21 at 6 p.m. Council Chambers 4 Town Council Meeting Regular Session June 7, 2023 Five-Year Financial Forecast June 7, 2023 OVERVIEW General Fund, Highway Fund, Capital Fund, and Community Center Fund Snapshot based upon known current information Serves as planning document for future budgets Forecast is updated annually as part of the budget process Sources: University of Arizona, Joint Legislative Budget Committee, Arizona Department of Transportation, as well as the knowledge, expertise and professional judgment by Town management and staff GENERAL FUND SOURCES - ASSUMPTIONS Assumes continued economic recovery with no major economic downturns All revenue sources at or above pre-pandemic levels Continued growth of 3-5% in most local sales tax categories Construction sales tax and permitting revenues reflect continued, stable activity in near term, with slight declines beginning FY 26/27 due to reduced available land for new development Conservative commercial permitting activity forecast Single family residential permits State shared revenues One time increase in FY 23/24 due to change in state allocation adjustment from 15% to 18% Income tax rate reduction and cap of 2.5% expected to affect FY 24/25 onward FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected 119 138 197 210 133 84 GENERAL FUND SOURCES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected SOURCES Taxes 27,031,462$ 26,398,318$ 28,024,560$ 28,758,293$ 31,096,860$ 30,747,462$ 31,672,268$ State Shared Revenue 18,405,604 22,953,222 22,052,464 21,821,068 22,548,044 23,303,237 24,071,732 Charges for Services 2,877,610 3,218,646 3,338,208 3,423,802 3,517,977 3,613,226 3,684,639 Licenses & Permits 2,636,961 1,717,118 1,827,011 2,357,215 2,601,111 1,982,150 1,756,252 Intergovernmental 1,600,500 1,869,500 1,887,295 1,905,268 1,923,421 1,941,755 1,960,272 Grants 659,000 657,415 663,989 670,629 677,335 684,109 690,950 Miscellaneous 611,900 263,000 273,520 284,461 295,839 307,673 319,980 Fines 85,000 125,000 126,250 127,513 128,788 130,076 131,376 Interest Income 300,000 300,000 255,690 263,730 271,439 279,805 287,939 Total Sources 54,208,037 57,502,219 58,448,987 59,611,979 63,060,815 62,989,491 64,575,408 GENERAL FUND GENERAL FUND USES - ASSUMPTIONS Employee pay adjustments and police step increases included in all years of forecast Modest capacity for new FTEs Continued capacity for normal increases in employee-related personnel costs (ERE) Continuation of elevated PSPRS payments until FY 24/25, with a 40% decrease expected O&M assumes current service levels Transfers for CIP projects assumed at 5% of sales tax collections per Town Council financial policies, plus all fund balance over 30% reserve GENERAL FUND USES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected USES Personnel 33,379,955 35,652,260 36,159,451 37,322,888 38,617,334 39,879,057 41,237,279 O&M 11,549,240 13,386,754 13,452,376 13,855,121 14,061,752 14,429,593 14,655,352 Capital Outlay 848,382 1,360,600 537,030 547,771 558,726 569,901 581,299 Transfers Out 15,996,977 12,274,644 10,907,325 7,413,122 9,369,393 7,618,719 7,622,865 Total Uses 61,774,554 62,674,258 61,056,182 59,138,901 62,607,205 62,497,269 64,096,794 Surplus/(Use of Fund Balance)(7,566,517) (5,172,040) (2,607,195) 473,077 453,610 492,222 478,614 Beginning Fund Balance 30,390,423 22,823,906 17,651,867 15,044,672 15,517,749 15,971,360 16,463,582 Ending Fund Balance 22,823,906$ 17,651,867$ 15,044,672$ 15,517,749$ 15,971,360$ 16,463,582$ 16,942,196$ Reserve as % of Expenditures 49.9%35.0%30.0%30.0%30.0%30.0%30.0% GENERAL FUND GENERAL FUND FORECAST $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 $55,000,000 $60,000,000 $65,000,000 $70,000,000 FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected General Fund Sources, Uses and Fund Balance USES SOURCES FUND BALANCE RESERVE (30%) HIGHWAY FUND SOURCES - ASSUMPTIONS Arizona Department of Transportation forecasts moderate growth, 3.4 - 3.6%, in highway user gas tax (HURF) revenues Other revenue sources assume modest and incremental growth Transfers in from the Capital Fund supplement HURF revenues for roadway projects identified in the tentative, ten-year CIP First Avenue mill/overlay - $1.7 million in FY 24/25 Rancho Vistoso Blvd. mill/overlay - $2 million in FY 25/26 Tangerine Road mill/overlay - $2.6 million in FY 26/27 Annual pavement preservation program La Cañada bridge deck repair ($7.7 million in FY26) not included in forecast as we are applying for outside funding HIGHWAY FUND SOURCES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected SOURCES State Shared Revenue 4,127,100$ 4,334,608$ 4,489,198$ 4,646,394$ 4,804,458$ 4,972,076$ 5,140,562$ Licenses & Permits 26,500 25,000 25,025 25,526 25,781 26,039 26,299 Interest Income 110,000 70,000 280,000 255,077 361,457 314,754 277,131 Miscellaneous 7,825 3,000 3,120 3,245 3,375 3,510 3,650 Transfers from Capital Fund - 1,500,000 4,000,000 4,000,000 4,000,000 - - Total Sources 4,271,425 5,932,608 8,797,343 8,930,241 9,195,071 5,316,378 5,447,642 HIGHWAY FUND HIGHWAY FUND USES - ASSUMPTIONS Personnel and O&M figures reflect similar assumptions to General Fund Pavement preservation funding is included at $2.5 – $2.8 million per year Capital outlay reflects ten-year, tentative CIP schedule HIGHWAY FUND USES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected USES Personnel 1,196,095 1,262,861 1,382,643 1,403,978 1,432,041 1,460,744 1,490,102 O&M 766,518 1,003,930 983,979 1,003,628 1,023,671 1,044,114 1,064,966 Capital Outlay 2,641,398 4,202,000 4,995,500 6,462,063 5,852,542 2,819,532 2,888,521 Total Uses 4,604,011 6,468,791 7,362,121 8,869,669 8,308,254 5,324,390 5,443,588 Surplus/(Use of Fund Balance)(332,586)(536,183)1,435,222 60,572 886,817 (8,012)4,054 Beginning Fund Balance 1,206,985 874,399 338,216 1,773,438 1,834,010 2,720,828 2,712,816 Ending Fund Balance 874,399$ 338,216$ 1,773,438$ 1,834,010$ 2,720,828$ 2,712,816$ 2,716,869$ HIGHWAY FUND HIGHWAY FUND FORECAST $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 $10,000,000 FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected Highway Fund Sources, Uses and Fund Balance USES SOURCES FUND BALANCE CAPITAL FUND SOURCES - ASSUMPTIONS Capital Fund is supported by General Fund transfers, vehicle reserves for fleet replacements, bond proceeds and grants Miscellaneous revenues, including sale of assets and insurance recoveries held steady in the forecast Non-enterprise fund vehicle reserves charged to General Fund based on replacement cost of each vehicle over useful life and includes 10% cost inflation Transfers annually from the General Fund reflect 5% of sales tax and excess fund balance over 30% reserve CAPITAL FUND SOURCES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected SOURCES State Grants -$ 620,000$ -$ -$ -$ -$ -$ Interest Income 350,000 100,000 99,159 67,053 59,657 57,079 68,903 Miscellaneous 140,000 115,000 115,000 115,000 115,000 115,000 115,000 Vehicle Reserves 820,010 892,540 993,594 1,109,885 1,238,145 1,379,575 1,535,501 Transfers from General Fund 13,500,000 10,000,000 8,619,145 5,121,939 7,385,484 5,774,234 6,063,153 Transfer from Community Center Fund 4,079,275 - - - - - - Total Sources 18,889,285 11,727,540 9,826,899 6,413,877 8,798,285 7,325,888 7,782,558 CAPITAL FUND CAPITAL FUND USES - ASSUMPTIONS Two temporary CIP project managers through FY 23/24; one in FY 24/25 and FY 25/26; no personnel costs after FY 25/26 Capital outlay reflects ten-year, tentative CIP schedule, excluding the new police station, pending an identified funding source New vehicle purchases (in addition to replacements) assumed at one patrol vehicle and two other vehicles annually 10% inflation for vehicle replacements Transfers out to the Highway Fund for roadway CIP projects CAPITAL FUND USES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected USES Personnel 236,528 254,765 157,755 158,790 - - - O&M 4,162 - - - - - - Capital Outlay 19,033,018 23,131,471 5,951,102 6,190,937 6,212,477 8,237,652 7,420,852 Transfers to Highway Fund - 1,500,000 4,000,000 4,000,000 4,000,000 - - Total Uses 19,273,708 24,886,236 10,108,857 10,349,727 10,212,477 8,237,652 7,420,852 Surplus/(Use of Fund Balance)(386,623)(13,158,696)(281,959)(3,935,849)(1,414,191)(911,765)361,706 Beginning Fund Balance 23,952,930 23,566,307 10,407,611 10,125,652 6,189,803 4,775,612 3,863,847 Ending Fund Balance 23,566,307$ 10,407,611$ 10,125,652$ 6,189,803$ 4,775,612$ 3,863,847$ 4,225,553$ CAPITAL FUND CAPITAL FUND FORECAST $- $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected Capital Fund Sources, Uses and Fund Balance USES SOURCES FUND BALANCE COMMUNITY CENTER FUND SOURCES - ASSUMPTIONS Local sales tax figures follow same growth as General Fund for relevant categories Operations assumed on 18 holes for six months of the year in FY 23/24 for irrigation project Conservative 1% growth for Parks & Recreation related revenues to account for potential discretionary spending decreases as result of inflation HOA contributions end after FY 24/25, upon completion of five-year contracts COMMUNITY CENTER FUND SOURCES - FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected SOURCES Taxes 3,714,218$ 3,726,016$ 3,843,990$ 3,966,910$ 4,116,585$ 4,272,252$ 4,405,631$ Charges for Services 5,775,940 5,785,386 6,289,749 6,575,824 6,885,460 7,205,521 7,379,261 Interest Income 35,000 35,000 35,951 51,527 84,941 192,897 192,897 Miscellaneous 173,343 162,050 168,532 16,273 16,924 17,601 17,601 Total Sources 9,698,501 9,708,452 10,338,221 10,610,534 11,103,909 11,688,271 11,995,391 COMMUNITY CENTER FUND COMMUNITY CENTER FUND USES - ASSUMPTIONS Personnel and O&M figures reflect similar assumptions to General Fund Contracted expenditures include Pusch 9-hole course Capital outlay reflects ten-year, tentative CIP schedule $100,000 annually for Vistoso Trails Nature Preserve maintenance $150,000 annually for building improvements and minor assets (non-CIP) Debt service transfers for Parks and Recreation bonds and energy efficiency bonds COMMUNITY CENTER FUND USES – FORECAST Town of Oro Valley Five-Year Forecast FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected USES Personnel 1,017,000 1,114,639 1,203,022 1,241,000 1,280,116 1,320,880 1,363,032 O&M 5,391,991 5,294,659 5,527,141 5,633,589 5,723,318 5,806,780 5,891,734 Capital Outlay 1,853,347 1,820,500 1,426,300 1,729,000 1,735,000 1,700,000 250,000 Debt Service 191,480 210,684 214,898 219,196 223,580 228,051 232,612 Transfers Out 6,105,141 1,717,203 1,717,328 1,715,524 1,717,768 1,712,060 1,714,286 Total Uses 14,558,959 10,157,685 10,088,689 10,538,308 10,679,782 10,767,771 9,451,664 Surplus/(Use of Fund Balance)(4,860,458) (449,233) 249,532 72,226 424,127 920,501 2,543,727 Beginning Fund Balance 5,860,458 1,000,000 550,767 800,300 872,526 1,296,653 2,217,154 Ending Fund Balance 1,000,000$ 550,767$ 800,300$ 872,526$ 1,296,653$ 2,217,154$ 4,760,881$ COMMUNITY CENTER FUND COMMUNITY CENTER FUND FORECAST $- $2,000,000 $4,000,000 $6,000,000 $8,000,000 $10,000,000 $12,000,000 $14,000,000 $16,000,000 FY 22/23 Estimated FY 23/24 Tentative FY 24/25 Projected FY 25/26 Projected FY 26/27 Projected FY 27/28 Projected FY 28/29 Projected Community Center Fund Sources, Uses and Fund Balance USES SOURCES FUND BALANCE Questions? Town Council Meeting Regular Session June 7, 2023 Oro Valley Water Utility FY 2023/24 Water Rates Presentation June 7, 2023 The Oro Valley Water Utility 31 The Water Utility is an Enterprise Fund Funded solely from water sales, fees and charges All revenues are used for operating costs of the Utility Not dependent on the Town’s General Fund Administrative service fees are paid to the General Fund Water Rates Analysis Process, Goals and Assumptions 32 Goals: Meets revenue, cash reserve and debt service coverage requirements Recovers the cost of service Promotes water conservation and maintains the financial health of the Utility Assumptions: Water resource costs, growth, inflation, interest rates and personnel requirements Planned use of cash for existing system improvements Process: Annually, Utility staff prepares a water rate analysis report that is reviewed by and discussed with the Water Utility Commission The Commission and Utility staff make a recommendation to Council on the proposed water rates Proposed Potable Water Rates Recommendation 33 Potable Water Rates Recommendations: Increases to potable base rates Increases to potable commodity rates (Tiers 1-4) No other changes to potable water rates Why do we need a potable water rate increase: To offset increasing CAP water delivery and wheeling costs Projected CAP Tier 2a shortage – 12% increase in delivery charge Wheeling costs increasing 5% annually over the 5-year projection period Existing system capital projects Cash funding of capital projects over the 5-year projection period Proposed Potable Water Base and Commodity Rates 34 Proposed Potable Water Base Rate Increase: Water base rates increase by meter size: 87% of customers have 5/8-inch meter and will see a $1.20 per month increase in the base rate Proposed Potable Water Commodity Rate Increase: Commodity rates: The commodity rate is based on consumption tiers as shown to the right Meter Size Current Proposed Monthly (in inches)Potable Base Rates Potable Base Rates Increase 5/8 $ 19.94 $ 21.14 $ 1.20 3/4 $ 29.90 $ 31.69 $ 1.79 1 $ 49.83 $ 52.82 $ 2.99 1.5 $ 99.66 $ 105.64 $ 5.98 2 $ 159.46 $ 169.03 $ 9.57 3 $ 318.90 $ 338.03 $ 19.13 4 $ 498.29 $ 528.19 $ 29.90 6 $ 996.58 $1,056.37 $ 59.79 8 $1,594.53 $1,690.20 $ 95.67 Commodity Tiers Per 1,000 gallons Current Proposed Increase Tier 1 (5/8-inch meter) 0 - 7,000 $ 2.52 $ 2.65 $ 0.13 Tier 2 (5/8-inch meter) 7,001 – 16,000 $ 3.52 $ 3.88 $ 0.36 Tier 3 (5/8-inch meter) 16,001 – 32,000 $ 5.04 $ 6.05 $ 1.01 Tier 4 (5/8-inch meter) Over 32,000 $ 7.04 $ 8.80 $ 1.76 Potable Water Cost Comparisons 35 Monthly Water Bill Comparisons to Other Water Providers: 87% of Oro Valley Water Utility customers have a 5/8-inch meter and consume an average of 7,000 gallons per month These customers will see an increase to their monthly bill of $2.11 or 4.8% increase Water Provider Cost for 7,000 Gallons Cost for 15,000 Gallons Cost for 25,000 Gallons Cost for 40,000 Gallons Oro Valley Current $43.88 $79.24 $137.12 $242.22 Oro Valley Proposed $45.99 $84.23 $151.56 $277.81 Metro Water $47.75 $89.20 $158.20 $278.20 Marana Water $53.89 $101.50 $174.00 $310.45 Tucson Water $52.56 $129.92 $274.00 $558.86 Proposed Reclaimed Water Rate Recommendation 36 Reclaimed Water Rate Recommendation Increase to reclaimed commodity rate only Why do we need a reclaimed water rate increase Increased reclaimed water delivery costs Rate increase of 5% by Tucson Water to utilize Tucson Water’s infrastructure to deliver Oro Valley’s reclaimed water to the Oro Valley service area Proposed Reclaimed Water Commodity Rate & Cost Comparisons 37 Proposed Reclaimed Water Commodity Rate: Reclaimed Current Proposed Increase Commodity Rate/1,000 gallons $2.25 $2.35 $0.10 Golf irrigation (turf) is the primary consumer of reclaimed water Typical 18-hole turf customer consumes 10M gallons of water per month and would see an increase in their monthly bill of $1,000 per month or 3.6% Monthly reclaimed water bill comparisons to other water providers: Water Provider Cost for 10,000,000 Gallons Oro Valley Current $27,950.83 Oro Valley Proposed $28,930.83 Metro Water N/A Marana Water N/A Tucson Water $30,168.27 In Closing 38 Recommendation For Approval: The Water Utility Commission and Water Utility staff respectfully recommend approval of water rate increases to the potable base rates, potable commodity rates and reclaimed commodity rates If the proposed rates are approved, they will become effective July 8 and will be reflected on the water bills beginning in August of the new fiscal year 39 Questions? Town Council Meeting Regular Session June 7, 2023 FY 2023/24 Tentative Budget Adoption June 7, 2023 FY 2023/24 TENTATIVE BUDGET Tentative Budget totals $148,489,391 $600K increase from the Recommended Budget $785K, or 0.5%, increase from FY 2022/23 Adopted Budget FY2023/24 expenditure limitation calculated by Economic Estimates Commission - $165,078,676 Tentative Budget brings forward all changes from Manager’s Recommended Budget as outlined in the Council communication, including updated and revised CIP budget figures If approved, Tentative Budget establishes the overall expenditure limitation Structurally balanced budget reflects the careful allocation of available resources FY 2023/24 SOURCES: $148.5M $44.5M, 30% $30.1 M, 20% $27.3 M, 18% $16.1M, 11 % $13.7M, 9% $7 .3M, 5 % $6 .3M, 4% $1.9 M, 1 % $1 .4M, 1% Use of Fund Balance Sales Taxes State Shared Revenue Water Sales Charges for Services Miscellaneous Outside Funding Sources Fines , Licenses & Permits Impact Fees $0 $10 $20 $30 $40 $50 Millions FY 2023/24 EXPENDITURES: $148.5M $49.5M, 33.3 % $43.1 M, 29% $36.9M, 24.8% $11 .1 M, 7 .5% $8M, 5 .4 % Capital Personnel O&M Contingency Reserves Debt Service $0 $10 $20 $30 $40 $50 $60 Millions FY 2023/24 CAPITAL IMPROVEMENT PROGRAM (CIP): $47.8M $21.4 M, 45% $14.1M, 29% $5.4 M, 11 % $3 .6 M, 7 % $2 .8 M, 6 % $0 .4 M, 1 % $0 .1 M, 0 % $0 $5 $10 $15 $20 $25 Parks & Recreation Water System Streets /Roads Other Public Facilities Vehicle Replacement Stormwater Public Safety Millions FY 2023/24 GENERAL FUND OVERVIEW * Excludes budgeted contingency of $5.0M $26.4M, 45.9% $23M, 39.9% $3.2M, 5.6% $1.9M, 3.3% $1.7M, 3% $1.3M, 2.3% - 5 10 15 20 25 30 35 40 MillionsGeneral Fund Revenue: $57.5 Million $35.7M, 70.7% $13.4M, 26.6% $1.4M, 9.9% - 5 10 15 20 25 30 35 40 Personnel O&M CapitalMillionsGeneral Fund Expenditures: $50.4 Million FINAL NOTES AND NEXT STEPS Tentative Budget adoption sets the maximum spending ceiling at $148,489,391 Once approved, expenditure authority may only be reallocated or reduced Council has authority to amend budget throughout the fiscal year (but cannot increase expenditure authority) Publish Tentative Budget for two consecutive weeks Final Budget approval and public hearing set for June 21 regular session Questions? Town Council Meeting Regular Session June 7, 2023