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OFFICE OF THE CITY CLERK
COUNCIL MINUTES
February 26, 2026
The City Council of the City of Mesa met in the Study Session room at City Hall, 20 East Main Street, on
February 26, 2026, at 7:30 a.m.
COUNCIL PRESENT
COUNCIL ABSENT
OFFICERS PRESENT
Mark Freeman
Scott Somers*
Rich Adams
Jennifer Duff
Francisco Heredia
Alicia Goforth
Dorean Taylor
None
Scott Butler
Holly Moseley
Jim Smith
(*Participated in the meeting through the use of video conference equipment.)
Mayor Freeman conducted a roll call.
1-a.
Hear a presentation and discuss the FY 2026/27 General Governmental and Utility funds
principles, priorities, and forecast.
Management and Budget Director Brian Ritschel introduced Deputy Director Chris Olvey and
displayed a PowerPoint presentation. (See Attachment 1)
Mr. Ritschel presented a chart focusing on Fiscal Year (FY) 25/26 comparing homeowner’s
annual costs for cities in the state, emphasizing that Mesa is the third most affordable city. He
discussed the factors considered in the homeowner comparison to determine each city’s annual
cost. (See Pages 2 and 3 of Attachment 1)
Mr. Ritschel explained that the City uses in-house statistical software and a conservative, multi-
year approach to develop five-year financial and revenue forecasts, ensuring long-term
sustainability of services. He noted that the model incorporates both broader economic indicators
and Mesa-specific factors. He stated that expenditure forecasting follows a similar process with
personal services, commodities and capital, which have continued to increase in cost annually.
(See Pages 4 through 6 of Attachment 1)
Mr. Ritschel reminded Council that the General Governmental Funds include the General Fund
and the Quality of Life Fund, which is dedicated to funding police officers and fire fighters. He
identified the correlation between the City’s financial policies and the financial principles, focusing
on the need to be structurally balanced and sustainable to avoid the use of savings. (See Page 8
of Attachment 1)
Study Session
February 26, 2026
Page 2
Mr. Ritschel reviewed the current outlook for revenue pressures and the annual impact of revenue
loss. He reported that in addition to the loss of residential rental sales tax and the implementation
of the State income flat tax, the sales tax revenue has been flat for the past three fiscal years,
while costs continue to rise. He reported that although income taxes are being collected currently
for individuals and corporations, distributions to cities and towns do not occur until two years later,
further affecting revenue availability. (See Page 9 of Attachment 1)
Mr. Ritschel presented a graph illustrating the inflation growth rate in the United States (U.S.),
identifying an inflation surge in 2021 after COVID and declining in 2024. He stated that despite
lower inflation rates in 2024, purchase contracts and commodities pricing have not lowered prices.
He emphasized that prices have remained and inflation builds upon those prices, which cause
expense pressures. (See Page 10 of Attachment 1)
Responding to a question posed by Councilmember Adams, Mr. Ritschel confirmed that flat or
declining retail sales tax revenue is occurring statewide, not only in Mesa.
City Manager Scott Butler explained that while retail spending remains strong, overall sales tax
revenue is affected by state-level tax changes, including the removal of certain taxable categories
and residential rentals, which has contributed to flat revenue.
Mr. Ritschel confirmed that growth in retail and utilities is helping offset losses and preventing
revenue decline.
Mayor Freeman advised that there are pending state legislation bills that could further reduce
sales tax revenue collection for municipalities.
Mr. Ritschel highlighted the current outlook for expenditure pressures seen by the City and the
rising costs across several categories, and discussed the factors contributing to the increases.
(See Pages 11 and 12 of Attachment 1)
Mr. Ritschel explained that while FY 24/25 revenues slightly exceeded expenditures, upcoming
years are expected to see higher spending and some revenue declines. He stated the City is
projected to reach structural balance by FY 29/30, with reserves stabilizing around 20% to 21%,
above the 10% to 15% principal target. (See Page 13 of Attachment 1)
Mr. Ritschel provided an overview of the FY 25/26 adopted budget forecast from last year showing
the net sources and uses were negative throughout the forecast due to significant increases in
personnel costs, delaying structural balance beyond the forecast. (See Page 14 of Attachment 1)
Mr. Ritschel then reviewed the current forecast, noting that revised revenue estimates and a 2%
departmental reduction have improved the outlook. He stressed that the forecast achieves
structural balance within the projection period by FY 29/30 and maintains stronger reserve levels.
He added that the outlook remains subject to change as budget decisions are finalized. (See
Page 15 of Attachment 1)
Mr. Butler commented that Council and staff’s leadership has accelerated structural balance
despite new financial pressures. He discussed several of the compounding pressures and
challenges and how the City has been able to stabilize reserves and use a conservative approach.
Study Session
February 26, 2026
Page 3
Discussion ensued regarding potential challenges related to state legislation and tax conformity,
as well as key budget factors including forecasting methods and fluctuations, 2% departmental
reductions, and a conservative forecasting philosophy to maintain a balanced reserve fund.
Mr. Olvey explained that Mesa is the second lowest for sales tax revenue per capita, compared
to other Valley cities. He added that the City has a 2% sales tax rate and noted that Mesa does
not have a sales tax on groceries, which impacts the City’s standing compared to other cities.
Mr. Ritschel advised that Mesa is highly reliant on sales tax, and that during COVID, local
shopping boosted revenues significantly, but as normal routines resumed, residents began
spending more in other cities like Scottsdale and Chandler. He emphasized that keeping spending
local would help increase Mesa’s sales tax growth.
Councilmember Goforth commented that the City of Scottsdale benefits from attracting non-
residents to spend money there, and the COM is working through economic development efforts
to similarly attract outside visitors to generate sales tax revenue.
Mr. Ritschel clarified that the COM does not tax groceries, unlike many other cities; and other
cities collect more sales tax when people purchase food, giving them an advantage in overall
collections.
Mr. Butler discussed ways that the Council has prioritized improving retail development to capture
more sales tax locally. He also noted that Mesa’s lower tax rate and lack of a food tax contribute
to lower overall collections compared to cities like Glendale, and that higher-end retail generates
more revenue. He stressed that the City is working to improve the quality of retail to boost returns.
Responding to a question posed by Councilmember Taylor, Mr. Ritschel explained that grant
funds for the net sources and uses are not included in the one-time expenses and are accounted
for in a separate, restricted fund in accordance with accounting standards; therefore, are not
included in the General Governmental Fund totals.
In response to a question from Councilmember Adams, Mr. Ritschel explained that sales tax rate
information is included in the homeowner comparison on the final page. He noted that the table
outlines each city’s rates for water, wastewater, and taxes and is available on the City’s website,
www.mesaaz.gov, under the homeowner comparison section.
Mr. Olvey provided an overview of the Utility Fund financial policies and principles, noting that the
financial policies have maintained a reserve balance of 8% to 10%, similar to the General
Governmental funds. He emphasized that the City’s financial principles strive for 20% or higher
for the reserve fund balance for the Utility Fund, and the financial policies call for an examination
of utility rates annually. (See Page 19 of Attachment 1)
Mr. Olvey explained that while utilities are managed individually, they are evaluated collectively
due to yearly fluctuations. He commented that the reserve balance helps stabilize rates and
support phased implementation of new programs or operational changes. (See Page 20 of
Attachment 1)
Mr. Olvey highlighted significant inflationary cost increases across utility operations from FY 20/21
to FY 24/25. He indicated that additional cuts on the Colorado River are expected to create more
expense pressure. He presented a graph illustrating rising utility operating costs since 2021,
noting current FY 25/26 are estimates that will continue to fluctuate. He indicated that the
Study Session
February 26, 2026
Page 4
wastewater utility costs stand out due to major maintenance and upkeep costs of the aging 91st
Avenue Water Reclamation Plant, which is the biggest wastewater plant in Arizona. (See Pages
21 and 22 of Attachment 1)
Mr. Olvey provided an update on utility capital projects, noting that the Central Mesa Reuse
Pipeline will be completed this year and Smart Metering by the end of the calendar year. He
reported that the Signal Butte Water Treatment Plant Expansion is under construction through
2027, while Natural Gas capacity expansion efforts are ongoing. He also highlighted the
Broadway Road Improvements Project as a coordinated effort with Transportation and multiple
utilities to assess and implement necessary upgrades. (See Page 23 of Attachment 1)
Mr. Olvey reviewed the updated forecast illustrating expenses exceeding revenues from FY 25/26
through FY 27/28, causing a temporary drawdown of the Utility Fund balance. He noted beginning
in FY 28/29, revenues surpass expenses, allowing the fund balance to recover to slightly above
20% by the end of the forecast period. (See Page 24 of Attachment 1)
Mr. Olvey highlighted that the original adopted forecast showed ongoing deficits for net sources
and uses through FY 28/29, and low reserve balances of 4.9% in FY 27/28, with only slight
recovery in FY 29/30. He reported that the original forecast did not include a capacity fee and to
manage the $400 million in growth-related utility projects, $180 million in infrastructure projects
were deferred out of the forecast to accommodate for priority projects. He stated the current
forecast includes the impact of a capacity fee to fund those growth projects separately from base
utility rates. (See Pages 25 and 26 of Attachment 1)
In response to multiple questions from Councilmember Duff, Mr. Olvey clarified that a new well
project for growth would be funded by capacity fees, while rehabilitation projects of a current well
are funded through the utility fund. He indicated that maintaining around 20% reserves is
important as credit rating agencies consider reserve balance percentages.
Responding to questions from Councilmember Goforth, Mr. Ritschel explained the accounting
approach to issuing debt service and payments. He added that the General Fund follows the
same accounting approach and is also not included in the sources.
Mr. Butler explained that the capacity fee restores the principle of “growth paying for growth,”
reducing pressure on existing ratepayers. He noted that the City plans to conduct an impact fee
study to address other growth-related costs to ensure that growth is not being borne on the back
of other taxpayers.
In response to a question posed by Councilmember Heredia, Mr. Ritschel replied that the City
evaluates both growth-related and maintenance projects, balancing priorities and financial
impacts. He commented that the capacity fee helped remove $400 million in growth costs from
the operating forecast, allowing better focus on other projects.
Responding to a question from Councilmember Heredia, Mr. Olvey explained that population
growth is factored in through account growth projections for each utility, which influence revenues.
Vice Mayor Somers suggested treating water as a commodity in Economic Development to
increase Mesa’s financial stability.
Study Session
February 26, 2026
Page 5
In response to a question from Vice Mayor Somers, Chief Financial Officer Michael Kennington
explained that bond holders and investors are aware of water supply risks and consider them
when evaluating bonds.
Mr. Butler clarified that uncertainty around Colorado River water remains and could lead to future
impacts depending on federal decisions or legal outcomes, requiring the City to adapt as
conditions evolve. He pointed out that Mesa has intentionally declined some economic
development opportunities when the water demand was too high compared to the number of jobs
created, prioritizing efficient use of water resources.
Discussion ensued regarding the City’s purpose of maintaining a 20% reserve balance and the
benefits to the City and ratepayers.
Councilmember Adams expressed support for the policy-level discussion, emphasizing its value
for transparency and helping the public understand financial decisions. He highlighted the
importance of maintaining a strong financial position, adding that sound policies support long-
term projects, help manage unexpected costs, and allow the City to secure favorable rates when
issuing debt, ultimately benefiting the community.
Mr. Olvey compared a chart illustrating the improvements in the ending fund balance reserves
from the adopted budget forecast and the current forecast. (See Page 27 of Attachment 1)
Mr. Ritschel outlined the budget process schedule, noting that budget meetings will run from
March 4 through April 30, 2026, with a public hearing and final adoption scheduled for June 1,
2026, and adoption of the secondary property tax on July 20, 2026. (See Page 28 of Attachment
1)
In response to a question posed by Mayor Freeman, Mr. Butler replied that the Quality of Life tax
is in perpetuity.
Responding to a question from Councilmember Taylor, Mr. Ritschel clarified that although the
majority of the Quality of Life tax currently supports public safety for police and fire services, the
tax is restricted with specific allowable uses, including some street-related purposes, and any
excess funds may be allocated to specific areas.
Mayor Freeman commented that the City subsidizes water payments by $10.2 million to avoid
steep increases in residential rates, while maintaining strong reserves by drawing them down and
replenishing them responsibly. He raised concerns about proposed state legislation that could
limit fee and rate increases and reduce revenue to cities. He noted that any city sales tax increase
must be approved by voters under the City Charter, and he stressed the importance of maintaining
strong reserves.
Mayor thanked staff for the presentation.
2.
Acknowledge receipt of minutes of various boards and committees.
2-a.
Design Review Board meeting held on January 13, 2026.
2-b.
Approval of minutes from City Council Executive Sessions held on October 6, November
13, December 1, December 8, 2025; and January 22, 2026.
Study Session
February 26, 2026
Page 6
It was moved by Councilmember Duff, seconded by Councilmember Adams, that receipt of the
above-listed minutes be acknowledged.
Upon tabulation of votes, it showed:
AYES – Freeman–Somers–Adams–Duff–Goforth–Heredia–Taylor
NAYS – None
Carried unanimously.
3.
Current events summary including meetings and conferences attended.
Mayor Freeman and Councilmembers highlighted the events, meetings, and conferences recently
attended.
4.
Scheduling of meetings.
City Manager Scott Butler stated that the schedule of meetings is as follows:
Thursday, March 5, 2026, 7:30 a.m. – Study Session
Thursday, March 5, 2026, 8:00 a.m. – Audit, Finance and Enterprise Committee meeting
Monday, March 9, 2026, 5:15 p.m. – Study Session
Monday, March 9, 2026, 5:45 p.m. – Regular Council
5.
Adjournment.
Without objection, the Study Session adjourned at 9:13 a.m.
____________________________________
MARK FREEMAN, MAYOR
ATTEST:
_______________________________
HOLLY MOSELEY, CITY CLERK
I hereby certify that the foregoing minutes are a true and correct copy of the minutes of the Study Session
of the City Council of Mesa, Arizona, held on the 26th day of February 2026. I further certify that the
meeting was duly called and held and that a quorum was present.
_______________________________
HOLLY MOSELEY, CITY CLERK
lr
(Attachments – 1)
Financial Forecast Overview
February 26, 2026
PRESENTED BY:
BRIAN A. RITSCHEL, MANAGEMENT & BUDGET DIRECTOR
CHRIS OLVEY, MANAGEMENT & BUDGET DEPUTY DIRECTOR
Study Session
February 26, 2026
Attachment 1
Page 1 of 36
Homeowner Comparison
2
Fiscal Year 2025/26 Typical Homeowner’s Annual Cost Comparison
Estimated as of April 2026
*includes 25% Water rates increase
$1,853
$2,041
$2,242
$2,304
$2,382
$2,652
$2,760
$2,937
$-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
Chandler
Scottsdale
Mesa
Phoenix
Tempe
Tucson
Glendale
Gilbert
Primary Property Tax
Secondary Property Tax
City Sales Tax
Solid Waste
Water
Wastewater
Gilbert*
Study Session
February 26, 2026
Attachment 1
Page 2 of 36
What’s included in the Homeowner
Comparison?
3
• A tool to compare local revenues collected that support local government
services provided to its residents.
• The comparison includes the following categories
• Property Tax (Primary & Secondary): based on Mesa’s 2025 median Limited
Property Value (LPV) and each city’s FY 25/26 property tax rates
• City Sales Tax: calculated by applying each city’s sales tax rates to the
Bureau of Labor Statistics’ annual Consumer Expenditure Survey
• Solid Waste: uses 90-gallon barrel rate for each city
• Water: uses 6,000 gallon median monthly residential consumption with ¾”
meter
• Wastewater: uses 4,000 gallon median residential consumption during
winter months
Study Session
February 26, 2026
Attachment 1
Page 3 of 36
Financial Forecasting
• The City uses current expenditures/expenses and
revenues along with historical trends as a basis
to forecast future expenditures/expenses and
revenues over multiple years
• The City uses a conservative multi-year
forecasting approach which allows for evaluation
of the sustainability of programs and services
• Future needs are incorporated to enhance ability
to plan
• The City’s financial policies call for the use of on-
going revenues for on-going
expenditures/expenses
4
Study Session
February 26, 2026
Attachment 1
Page 4 of 36
Revenue Forecasting
• Statistical software is applied in-house to analyze
the correlation between economic trends and the
City’s revenue sources
• Revenue forecasts also include collaboration with
departments, such as utility revenues
• Relevant economic indicators are considered such
as: population/account growth, wages,
unemployment, building permits, gas prices, etc.
• Mesa specific factors are applied such as economic
development activities, retail trends, etc.
5
Study Session
February 26, 2026
Attachment 1
Page 5 of 36
Expenditure/Expense Forecasting
Expenditure/expense categories are analyzed and forecasted individually
Personal Services
◦Many factors contribute to overall estimates such as pension rates, medical premiums, salary
movement, etc.
Other Services/Commodities
◦Large specialty contracts are handled separately while forecasted consumer price index is applied
to general expenditures
◦These large contracts include utility expenses, such as water commodity purchases, water and
wastewater treatment plant chemicals, and solid waste tipping fees
Capital
◦Majority of expenditures are related to construction projects and vehicle purchases. Multi-year
plans are developed and included in the forecast
◦Debt service payments related to capital improvement projects are included in forecasts
6
Study Session
February 26, 2026
Attachment 1
Page 6 of 36
General Governmental Funds
7
Study Session
February 26, 2026
Attachment 1
Page 7 of 36
General
Governmental
Funds –
Financial
Policies &
Principles
8
Financial Policies
(Council Adopted)
•
Adoption of a Balanced
Budget
•
Maintain a Reserve Balance
of 8-10%
•
Forecasts will be Provided
over a Multi-Year Period
•
Fees & Charges will be
Reviewed on an Annual Basis
•
Adoption of a 5-Year Capital
Improvement Plan
Financial Principles
•
Balance Net Sources & Uses
•
10-15% Reserve Fund
Balance over 5-Year
Forecasted Period
•
Sustainability of Programs &
Services
•
Keep Wages & Benefits
Competitive to Retain &
Recruit Quality Staff
•
Investment in Capital &
Lifecycle Replacement
Projects
Study Session
February 26, 2026
Attachment 1
Page 8 of 36
Current Outlook – Revenue Pressures
• Loss of Residential Rental Sales Tax
• $18M annual impact beginning FY 24/25
• Implementation of State Income Flat Tax
• $6M estimated annual impact beginning FY 24/25
• Small growth in City and State Sales Tax collections
• +0.4% projected annual growth of FY 25/26 above FY 24/25
• Reduction in State Shared Revenues with incorporation of San Tan Valley
• $3M annual impact beginning FY25/26
• Reduction in Urban Revenue Sharing with Tax Conformity on federal H.R. 1
• $6M annual impact beginning FY 27/28
9
Study Session
February 26, 2026
Attachment 1
Page 9 of 36
U.S. Inflation Growth Rate
10
Source: Bureau of Labor Statistics, Consumer Price Index
• December 2025 prices are 24.4% above December 2020 levels
Study Session
February 26, 2026
Attachment 1
Page 10 of 36
Current Outlook – Expense Pressures
• Contracted Labor & Services (landscaping, custodial, maintenance, etc.)
• Fleet Maintenance & Repair (3rd party labor cost, parts, and fuel)
• Market-Driven Compensation & Competitive Benefits
• Software & Licensing
• Continuing ARPA Initiatives with ongoing General Fund support (Real Time
Crime Center, City wi-fi, homeless support, behavioral health)
11
Study Session
February 26, 2026
Attachment 1
Page 11 of 36
Increased Cost Pressures
12
General Governmental Funds
FY 20/21
FY 24/25
4-Year Increase
Fleet Maintenance & Repair (90% of costs PD/Fire)
$9.6M
$14.5M
+51%
Police & Fire Dept Software & Licensing
$3.1M
$7.3M
+135%
Building Maintenance & Custodial Services
$6.1M
$10.0M
+64%
Landscaping Services
$2.9M
$4.5M
+55%
Citywide that Impacts General Gov’t Funds
FY 20/21
FY 24/25
4-Year Increase
Medical & Dental Claims
$89.5M
$124.7M
+39%
Citywide Software & Licensing
$6.3M
$11.1M
+76%
Study Session
February 26, 2026
Attachment 1
Page 12 of 36
Total Sources & Uses
General Governmental Funds – Current Forecast
13
Study Session
February 26, 2026
Attachment 1
Page 13 of 36
FY 25/26 Adopted Budget Forecast
General Governmental Funds
14
Projected
Budget
Forecast
Forecast
Forecast
Forecast
FY 24/25
FY 25/26*
FY 26/27
FY 27/28
FY 28/29
FY 29/30
Beginning Reserve Balance
$247.5
$242.9
$191.5
$152.8
$114.9
$91.6
Total Sources
$701.5
$693.5
$678.6
$698.3
$727.8
$749.3
Total Uses
$706.0
$744.9
$717.3
$736.2
$751.1
$768.2
Net Sources and Uses
($4.6)
($51.4)
($38.7)
($37.9)
($23.3)
($18.9)
Ending Reserve Balance
$242.9
$191.5
$152.8
$114.9
$91.6
$72.7
Ending Reserve Balance Percent**
33.8%
26.7%
20.8%
15.3%
11.9%
9.2%
*Budgeted sources and uses include $26.1M in carryover funds.
data as of May 2025
**As a % of all Next Year's uses of funding
dollars in millions
Study Session
February 26, 2026
Attachment 1
Page 14 of 36
Current Forecast
General Governmental Funds
15
Actuals
Projected
Forecast
Forecast
Forecast
Forecast
Forecast
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
Beginning Reserve Balance
$247.5
$264.3
$228.0
$211.1
$183.8
$167.3
$169.6
Total Sources
$733.6
$700.9
$701.5
$715.0
$745.4
$773.0
$808.9
Total Uses
$716.8
$737.2
$718.3
$742.3
$761.9
$770.7
$793.2
Net Sources and Uses
$16.8
($36.3)
($16.8)
($27.3)
($16.5)
$2.3
$15.8
Ending Reserve Balance
$264.3
$228.0
$211.1
$183.8
$167.3
$169.6
$185.4
Ending Reserve Balance Percent*
35.8%
31.7%
28.4%
24.1%
21.7%
21.4%
22.6%
data as of February 2026
*As a % of all Next Year's uses of funding
dollars in millions
Study Session
February 26, 2026
Attachment 1
Page 15 of 36
Current Forecast
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31
Net Sources and Uses
($36.3)
($16.8)
($27.3)
($16.5)
$2.3
$15.8
Ending Reserve Balance
$228.0
$211.1
$183.8
$167.3
$169.6
$185.4
Ending Reserve Balance Percent**
31.7%
28.4%
24.1%
21.7%
21.4%
22.6%
data as of February 2026
**As a % of all Next Year's uses of funding
dollars in millions
Adopted Budget
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31*
Net Sources and Uses
($51.4)
($38.7)
($37.9)
($23.3)
($18.9)
($11.7)
Ending Reserve Balance
$191.5
$152.8
$114.9
$91.6
$72.7
$61.0
Ending Reserve Balance Percent**
26.7%
20.8%
15.3%
11.9%
9.2%
7.4%
*FY 30/31 was outside of the 5-year forecast presented with FY 25/26 Budget Adoption
data as of May 2025
**As a % of all Next Year's uses of funding
dollars in millions
General Governmental Funds Forecast
Changes from Adopted Budget Forecast
16
Achieves
structural balance
two years earlier
than the Adopted
Budget forecast
Study Session
February 26, 2026
Attachment 1
Page 16 of 36
Current Forecast
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31
Net Sources and Uses
($36.3)
($16.8)
($27.3)
($16.5)
$2.3
$15.8
Ending Reserve Balance
$228.0
$211.1
$183.8
$167.3
$169.6
$185.4
Ending Reserve Balance Percent**
31.7%
28.4%
24.1%
21.7%
21.4%
22.6%
data as of February 2026
**As a % of all Next Year's uses of funding
dollars in millions
Adopted Budget
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31*
Net Sources and Uses
($51.4)
($38.7)
($37.9)
($23.3)
($18.9)
($11.7)
Ending Reserve Balance
$191.5
$152.8
$114.9
$91.6
$72.7
$61.0
Ending Reserve Balance Percent**
26.7%
20.8%
15.3%
11.9%
9.2%
7.4%
*FY 30/31 was outside of the 5-year forecast presented with FY 25/26 Budget Adoption
data as of May 2025
**As a % of all Next Year's uses of funding
dollars in millions
General Governmental Funds Forecast
Changes from Adopted Budget Forecast
17
Improvement in
ending fund
balance reserve
percentage
Study Session
February 26, 2026
Attachment 1
Page 17 of 36
Utility Fund
18
Study Session
February 26, 2026
Attachment 1
Page 18 of 36
Utility Fund –
Financial
Policies &
Principles
19
Financial Policies
(Council Adopted)
•
Adoption of a Balanced
Budget
•
Maintain a Reserve Balance
of 8-10%
•
Forecasts will be Provided
over a Multi-Year Period
•
Utility Rates Examined
Annually
•
Adoption of a 5-Year Capital
Improvement Plan
Financial Principles
•
Balance Net Sources & Uses
•
20% or Higher Reserve Fund
Balance
•
Smoothed Rate Adjustments
throughout the Forecast
•
Equity between Residential &
Non-Residential Rates
•
Affordable Utility Services
Study Session
February 26, 2026
Attachment 1
Page 19 of 36
Utility Operations
• Each utility is operated as a separate
business center
• Reserve balance can be used to smooth rate
adjustments year-to-year
• Reserve balance can be used to phase in
new programs or changes in operations
20
Study Session
February 26, 2026
Attachment 1
Page 20 of 36
Inflationary Pressures –
Baseline Operating Expenses
21
FY 20/21
FY 24/25
4-Year Increase
Fleet Maintenance & Repair
$10.2M
$15.3M
+51%
Solid Waste Disposal
$8.4M
$10.1M
+20%
Water Commodity
$10.2M
$15.9M
+56%
WTR/WW Plant Chemicals
$3.1M
$4.8M
+57%
Val Vista Water Treatment Plant
$8.7M
$14.1M
+61%
91st Ave. Water Reclamation Plant
$3.7M
$6.0M
+62%
Study Session
February 26, 2026
Attachment 1
Page 21 of 36
Inflationary Pressures –
Total Operating Expenses
22
Study Session
February 26, 2026
Attachment 1
Page 22 of 36
Priority Utility Capital Projects
• Significant Capital Projects:
• Central Mesa Reuse Pipeline
• Signal Butte Water Treatment Plant Expansion
• Smart Metering
• Natural Gas Capacity Expansion Projects
• Broadway Road Improvements w/ Transportation
23
Study Session
February 26, 2026
Attachment 1
Page 23 of 36
Total Sources & Uses
Utility Fund
24
Study Session
February 26, 2026
Attachment 1
Page 24 of 36
FY 25/26 Adopted Budget Forecast
Utility Fund
25
FY 24/25
Projected
FY 25/26
Budget
FY 26/27
Forecast
FY 27/28
Forecast
FY 28/29
Forecast
FY 29/30
Forecast
WATER
$3.6
($6.8)
($13.8)
($11.2)
($4.8)
$5.2
WASTEWATER
($9.5)
($12.2)
($7.7)
($3.8)
$0.8
$6.0
SOLID WASTE
($4.8)
($4.1)
$1.7
$0.7
$4.2
$10.4
ELECTRIC
$1.0
($1.1)
($1.1)
($1.5)
($1.8)
($2.3)
NATURAL GAS
($2.4)
($4.1)
($3.2)
($2.8)
$0.6
$0.5
DISTRICT COOLING
($0.5)
($0.2)
($0.2)
($0.3)
($0.2)
($0.2)
TOTAL NET SOURCES AND USES
($12.6)
($28.4)
($24.2)
($18.9)
($1.3)
$19.5
Beginning Reserve Balance
$117.0
$104.4
$76.0
$51.8
$32.9
$31.6
Ending Reserve Balance
$104.4
$76.0
$51.8
$32.9
$31.6
$51.0
Ending Reserve Balance Percent*
18.5%
11.9%
8.1%
4.9%
4.6%
7.0%
data as of May 2025
*As a % of Next Fiscal Year's Expenditures
dollars in millions
Study Session
February 26, 2026
Attachment 1
Page 25 of 36
Current Forecast
Utility Fund
26
Actuals
Projected
Forecast
Forecast
Forecast
Forecast
Forecast
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
WATER
$5.2
($8.2)
($2.5)
$2.2
$12.9
$16.3
$23.2
WASTEWATER
($4.1)
($8.0)
($5.8)
($5.4)
($2.2)
$4.0
$1.7
SOLID WASTE
$1.5
($3.0)
$1.2
($0.3)
$2.4
$8.8
$9.8
ELECTRIC
$0.7
($0.2)
($0.1)
($0.6)
($0.7)
($0.9)
($0.7)
NATURAL GAS
($0.5)
($3.5)
($2.5)
($2.3)
$1.0
$0.5
$1.6
DISTRICT COOLING
($0.3)
($0.6)
($0.2)
($0.2)
($0.2)
($0.2)
($0.2)
TOTAL NET SOURCES AND USES
$2.4
($23.5)
($9.8)
($6.7)
$13.2
$28.4
$35.3
Beginning Reserve Balance
$117.0
$119.4
$95.9
$86.0
$79.4
$92.6
$121.0
Ending Reserve Balance
$119.4
$95.9
$86.0
$79.4
$92.6
$121.0
$156.3
Ending Reserve Balance Percent*
21.4%
16.5%
13.8%
12.2%
13.6%
16.6%
20.3%
data as of January 2026
*As a % of Next Fiscal Year's Expenditures
dollars in millions
Study Session
February 26, 2026
Attachment 1
Page 26 of 36
Current Forecast
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31
Net Sources and Uses
($23.5)
($9.8)
($6.7)
$13.2
$28.4
$35.3
Ending Reserve Balance
$95.9
$86.0
$79.4
$92.6
$121.0
$156.3
Ending Reserve Balance Percent**
16.5%
13.8%
12.2%
13.6%
16.6%
20.3%
data as of February 2026
**As a % of all Next Year's uses of funding
dollars in millions
Adopted Budget
FY 25/26 FY 26/27 FY 27/28 FY 28/29 FY 29/30 FY 30/31*
Net Sources and Uses
($28.4)
($24.2)
($18.9)
($1.3)
$19.5
$33.3
Ending Reserve Balance
$76.0
$51.8
$32.9
$31.6
$51.0
$84.3
Ending Reserve Balance Percent**
11.9%
8.1%
4.9%
4.6%
7.0%
11.2%
*FY 30/31 was outside of the 5-year forecast presented with FY 25/26 Budget Adoption
data as of May 2025
**As a % of all Next Year's uses of funding
dollars in millions
Utility Fund Forecast
Changes from Adopted Budget Forecast
27
Improvement in
ending fund
balance reserves
and net sources
and uses
Study Session
February 26, 2026
Attachment 1
Page 27 of 36
Budget Process Calendar
28
March 4
Public Budget Meeting – Northeast Public Safety Facility
March 10
Public Budget Meeting – The Post
March 11
Public Budget Meeting – Gateway Library
April 2
Review FY 2026/27 Proposed Budget
April 2 – April 20
Department Budget Presentations to City Council
Review of Utility Projects Plan (CIP)
April 30
FY 2026/27 Tentative Budget Update
Review of Non-Utility Projects Plan (CIP)
May 18
Adoption of FY 2026/27 Tentative Budget
June 1
Public Hearing and Adoption of Capital Improvement Program
Final Adoption of FY 2026/27 Budget
Public Hearing on Secondary Property Tax
July 20
Adoption of Secondary Property Tax Levy
Study Session
February 26, 2026
Attachment 1
Page 28 of 36
Study Session
February 26, 2026
Attachment 1
Page 29 of 36
30
Utility Fund Transfer to General Fund
Current Forecast
Dollars in millions
Utility Transfer to General Fund
138.1
$
145.2
$
157.6
$
170.2
$
183.4
$
197.9
$
214.0
$
General Governmental Funds
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
Beginning Balance
247.5
$
264.3
$
228.0
$
211.1
$
183.8
$
167.3
$
169.6
$
Sources
733.6
$
700.9
$
701.5
$
715.0
$
745.4
$
773.0
$
808.9
$
Uses
716.8
$
737.2
$
718.3
$
742.3
$
761.9
$
770.7
$
793.2
$
Net Sources & Uses
16.8
$
(36.3)
$
(16.8)
$
(27.3)
$
(16.5)
$
2.3
$
15.8
$
End Balance
264.3
$
228.0
$
211.1
$
183.8
$
167.3
$
169.6
$
185.4
$
Reserve Balance Percentage
35.8%
31.7%
28.4%
24.1%
21.7%
21.4%
22.6%
Utility Fund
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
Beginning Balance
117.0
$
119.4
$
95.9
$
86.0
$
79.4
$
92.6
$
121.0
$
Sources
510.8
$
534.4
$
572.1
$
617.4
$
662.1
$
710.0
$
763.4
$
Uses
508.4
$
558.0
$
581.9
$
624.1
$
648.9
$
681.7
$
728.1
$
Net Sources & Uses
2.4
$
(23.5)
$
(9.8)
$
(6.7)
$
13.2
$
28.4
$
35.3
$
End Balance
119.4
$
95.9
$
86.0
$
79.4
$
92.6
$
121.0
$
156.3
$
Reserve Balance Percentage
21.4%
16.5%
13.8%
12.2%
13.6%
16.6%
20.3%
Study Session
February 26, 2026
Attachment 1
Page 30 of 36
Utility Transfer to General Fund
138.1
$
138.1
$
138.1
$
138.1
$
138.1
$
138.1
$
138.1
$
General Governmental Funds
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
Beginning Balance
247.5
$
264.3
$
220.9
$
184.6
$
125.3
$
63.5
$
6.1
$
Sources
733.6
$
693.8
$
682.0
$
683.0
$
700.2
$
713.2
$
733.1
$
Uses
716.8
$
737.2
$
718.3
$
742.3
$
761.9
$
770.7
$
793.2
$
Net Sources & Uses
16.8
$
(43.4)
$
(36.3)
$
(59.3)
$
(61.7)
$
(57.5)
$
(60.1)
$
End Balance
264.3
$
220.9
$
184.6
$
125.3
$
63.5
$
6.1
$
(54.0)
$
Reserve Balance Percentage
35.8%
30.8%
24.9%
16.4%
8.2%
0.8%
-6.6%
Utility Fund
FY 24/25
FY 25/26
FY 26/27
FY 27/28
FY 28/29
FY 29/30
FY 30/31
Beginning Balance
117.0
$
119.4
$
103.0
$
112.6
$
137.9
$
196.4
$
284.5
$
Sources
510.8
$
534.4
$
572.1
$
617.4
$
662.1
$
710.0
$
763.4
$
Uses
508.4
$
550.9
$
562.5
$
592.1
$
603.7
$
621.9
$
652.2
$
Net Sources & Uses
2.4
$
(16.5)
$
9.6
$
25.3
$
58.4
$
88.1
$
111.2
$
End Balance
119.4
$
103.0
$
112.6
$
137.9
$
196.4
$
284.5
$
395.7
$
Reserve Balance Percentage
21.7%
18.3%
19.0%
22.8%
31.6%
43.6%
58.5%
31
Utility Fund Transfer to General Fund
Hold Forecasted Transfer Amounts Equal to FY 24/25 Transfer Amount
$239.4M Impact:
•
Decrease to General
Governmental Funds
Balance
•
Increase to Utility Fund
Balance
•
The City could potentially
miss payment obligations
Dollars in millions
Study Session
February 26, 2026
Attachment 1
Page 31 of 36
City Sales Tax Revenues
32
Study Session
February 26, 2026
Attachment 1
Page 32 of 36
City Sales Tax Revenues
FY 22/23 through FY 24/25
33
Study Session
February 26, 2026
Attachment 1
Page 33 of 36
City Sales Tax Revenues
34
Study Session
February 26, 2026
Attachment 1
Page 34 of 36
State Shared Revenues
35
$
$20
$40
$60
$80
$100
$120
$140
Actuals
'21-'22
Actuals
'22-'23
Actuals
'23-'24
Actuals
'24-'25
Projected
'25-'26
Forecast
'26-'27
Forecast
'27-'28
Forecast
'28-'29
Forecast
'29-'30
Forecast
'30-'31
Millions
State Income Tax
State Sales Tax
Vehicle License Tax
Data as of January2026
Income Tax
distribution
increased from
15% to 18%
Implementation of
State Flat Tax
H.R. 1 Tax
Conformity
Study Session
February 26, 2026
Attachment 1
Page 35 of 36
Current Outlook
Expense Pressures
• Compensation & Benefits
• FY 25/26 Public Safety Sworn Benchmark Adjustment:
• $23M per year ongoing impact
• Up to 12% Salary increase
• FY 25/26 Non-sworn benchmark adjustment
• Step Pay increases under consideration:
• 5% for Public Safety Sworn Union employees
• 3-4% for Civilian employees
• Public Safety Overtime
36
Study Session
February 26, 2026
Attachment 1
Page 36 of 36