Oro Valley budget at $130 million | News

Oro Valley is in the final stages of adopting a $130 million budget for the fiscal year that begins July 1.

That’s down $21 million, or 14.2%, from the current year’s $151 million budget, largely due to an $18.6 million reduction in planned capital spending.

Within the overall 2026-‘27 spending plan, Town Manager Jeff Wilkins proposes:

• No new full-time staff positions;

• Pay raises up to 3% for town employees outside the Oro Valley Police Department;

• A $1.5 million reduction in Oro Valley’s discretionary contribution, above what it is required to spend, on police pensions. Oro Valley remains “committed” to funding its police pensions at 100%, Wilkins said; it was at 101% as of the most recent actuarial analysis;

• Total capital spending of $25.73 million, $6 million of which is going to the town’s continued investment in the Northwest Recharge, Recovery and Delivery System to bring more Colorado River water to Oro Valley.

Wilkins and Chief Financial Officer Dave Gephart propose a budget that assumes at least $250,000 in new revenue from a commercial “use” tax approved by council in January. It also incorporates approved fee increases for parks and recreation amenities.

“This budget reflects proactive fiscal management in response to evolving revenue and cost pressures,” Wilkins said in his budget message. “The town remains in a stable financial position, and this budget is designed to maintain that stability by sustaining core services, advancing priority infrastructure and taking deliberate steps to align spending with a more conservative long-term outlook.”

“It’s a lean budget,” Gephart said. “We’re hoping our residents don’t see any service-level declines.” 

While he lauded town staff for its continued prudence with spending, Gephart said, “We have to be very judicious on our spending moving forward, even more so now.”

“There’s not a lot of cushion here.”

One of two budget public hearings, followed by votes by the Oro Valley Town Council, takes place Wednesday, June 3. A second hearing and vote on a final budget would be on the Wednesday, June 17 agenda.

Where the money goes

Personnel expenses consume 34% of Oro Valley’s budget, followed by operations and maintenance (33%) and capital costs (20%). Oro Valley spends 7% of its funds on debt service.

“The core services are still there,” Wilkins said. “Everyone wants public safety, and the roads maintained. We’re holding firm on operations and maintenance.”

General Fund spending is pegged at $54.96 million. When the year is completed, the town expects to have $13.78 million in General Fund reserves, Gephart said, meeting its town council policy-mandated 25% reserve level if $2 million in contingency funds are not spent.

Holding the line on workforce

Oro Valley is not adding full-time positions in the new fiscal year; it intends to employ 358 full-time employees. “A decent percentage, one-third of our workforce, is public-safety related,” Wilkins said.

With the addition of part-time employees, representing “full-time equivalents” in 2026-27, Oro Valley plans to have a townwide total of 423 full-time equivalent positions. Personnel costs are expected to decline .l8 of 1% from the current year.

Oro Valley is budgeting for higher health insurance premiums; Wilkins notes the town’s self-insured health fund “experienced elevated claims this year.”

Pay increases

Raises of up to 3%, the same as a year ago, are planned for town employees not governed by Oro Valley’s memorandum of understanding with its police unions.

Raises for employees outside the police department would be prorated, Gephart said, depending on performance evaluations, start dates, whether individuals have received a promotion and accompanying pay raise this year, and other factors.

The recommended budget includes step increases for police personnel, and 3% increases for other eligible “non-sworn” OVPD employees such as administrative staff, dispatchers, and command staff.

Police officers would get additional raises over 6%, based upon the MOU.

Police budget, and pension payments

Even with raises, OVPD’s $20.59 million budget is down $737,000 from the current year.

“The decrease is almost entirely related to PSPRS,” said Gephart, referring to the state-administered Public Safety Personnel Retirement System.

During the current fiscal year, Oro Valley budgeted $2.78 million toward police pensions, of which approximately $2 million is considered “excess,” or above its required payment. Oro Valley now stands at 101% of full funding for pensions, based on a June 2025 actuarial report from PSPRS.

 “We’re overfunded,” Gephart said. “The intent is always to be 100% funded, and not significantly overfunded. What we’re trying to achieve here is balance.”

This year, then, the town decided to contribute about $1.2 million in “excess” contributions, down from the $2 million budgeted for 2025-26.

When the next actuarial reports come in December, Oro Valley can “see where we land,” Gephart said. “We’re in an historically good market right now,” and in fact some of the pension system’s funds are invested in equities. “As the market does well, we get the benefits of that.”

O&M is going up

Wilkins cites inflation, some one-time expenses, and “newly expanded facilities” as factors in a 5.3% increase in the operations and maintenance budget, from $41 million to $43.2 million.

The town expects higher expenses for utilities, anticipates 10% increases for both liability and property insurance costs, and is budgeting higher prices for vehicle replacement, software licensing, and its share of Central Arizona Project water.

Oro Valley must pay $200,000 toward the “middle mile” fiber communications project. And the town is running an election on July 21, at an estimated cost of $85,000.

The town expects to pay approximately $140,000 to take care of the planned pond at the Vistoso Trails Nature Preserve, and $40,000 to maintain the new police headquarters building, Wilkins said.

Where the money comes from

Revenue from locally levied sales taxes constitutes the largest share of Oro Valley’s anticipated income for 2026-27. That source is expected to generate $29.73 million, or 27% of all income.

“The sales tax forecast has significantly tightened,” Wilkins said, “reflecting a worsening revenue outlook and current year collections tracking below budget expectations.” Residential building permit activity “has slowed significantly, limiting construction sales tax growth and reducing the near-term revenue benefit of new development.”

State-shared revenue, derived from income tax, sales tax, vehicle license tax, and fuel taxes, is expected to reach $25.7 million, or 24% of Oro Valley’s anticipated income. Wilkins said Oro Valley’s share of state-redistributed revenues may decline over time as other communities grow. And, he said, highway fund revenues from the state “are insufficient to cover road maintenance needs without General Fund support.”

 Water sales are expected at $19.4 million, and charges for services should bring in $17.1 million. Combined, those four sources constitute 85% of all anticipated revenue.