Presentation

Financial Forecast Overview
February 26, 2026
PRESENTED BY:
BRIAN A. RITSCHEL, MANAGEMENT & BUDGET DIRECTOR
CHRIS OLVEY, MANAGEMENT & BUDGET DEPUTY DIRECTOR

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*

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

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

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

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

General Governmental Funds
7

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

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

U.S. Inflation Growth Rate
10
Source: Bureau of Labor Statistics, Consumer Price Index
• December 2025 prices are 24.4% above December 2020 levels

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

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%

Total Sources & Uses
General Governmental Funds – Current Forecast
13

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

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

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

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

Utility Fund
18

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

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

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%

Inflationary Pressures – 
Total Operating Expenses
22

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

Total Sources & Uses
Utility Fund
24

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

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

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

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