Eloy City Council Budget Work Session – March 31, 2025

At a work session held on Monday, March 31, 2025, at 5:30 p.m. in the Eloy City Council Chambers, the City Council received presentations from Finance Director Brian Wright on revenue projections for FY 2025‑2026, the proposed property tax rate, the Capital Improvement Plan (CIP), and strategies for using the city’s fund balance to pay off debt and expand infrastructure. Council provided guidance on the tax rate, debt repayment, and next steps in the budget process.

Public Comments & Testimony

• Bob Shu (6010 West Houser Road) spoke on behalf of his wife, Marlo Shu, and the “Houser Road 7” residents. He urged the Council to move forward with the Houser Waterline Extension Project, which was discussed at the May 20, 2024, budget work session. He expressed hope that the project would be funded in the upcoming budget and benefit both the residents and future development in the area.

Discussion Items

• Revenue Forecast (Item V‑A): Brian Wright presented a detailed revenue outlook for FY 2025‑2026. Key factors: inflation (up 1.8–2% overall, with eggs up 60% year-over-year), state economy growth of 1.9%, impacts of state legislative actions (e.g., capping food tax at 2% – Eloy already at 2%, so no direct effect unless eliminated; potential ballot measure November 2025). The general fund is projected to end FY 2024‑2025 at ~$21.4 million, with steady 5.2% annual growth over the past four years. Sales tax accounts for 41% of general fund revenue, intergovernmental (state-shared) revenue for 37%. Property tax rate discussions: Council historically adopts the maximum levy. The proposed maximum rate for 2025‑2026 is 0.9769 (down from 1.01 in 2024‑2025), yielding $52,000 from new construction plus an additional $29,443 if the maximum is taken, costing the average $100,000‑assessed home about $97.99. Councilmember Varaska, Curtis, and others expressed support for the maximum rate, citing stability and the risk of losing capacity if valuations drop. Council provided guidance to adopt the maximum levy. The Finance Director noted that Santan Valley incorporation could reduce the city’s half‑cent sales tax for streets by ~$400,000–$450,000 starting in FY 2026‑2027, though the general fund impact would be minor (~$100,000).
• Capital Improvement Plan & Fund Balance (Item V‑B): Brian Wright presented the CIP and fund balance strategy. The general fund balance is ~$34 million, of which $19.1 million is uncommitted. Staff recommended using $2.8 million of that uncommitted balance to pay off two water WIFA loans ($968,000, saving ~$88,000 in interest) and two wastewater WIFA loans ($1.9 million, saving ~$133,000), freeing up bonding capacity for water ($2.5 million) and sewer ($7.4 million). Council also discussed paying off the excise tax bond ($4.7 million) to free $385,000 in annual general fund capacity, but after discussion, Councilmember Snyder and others favored focusing on the water and wastewater loans first, leaving a cushion above the 75% fund balance threshold. Staff will incorporate that direction into the budget. The total CIP for FY 2025‑2026 is ~$26.8 million, with 75 projects. Key projects include: the Houser Waterline Extension ($750,000), Sunland Gin water line replacement ($1.1 million), upsizing the sewer main on Battaglia Road (part of a WIFA package), Toltec Road improvements ($1 million, contingent on Robson Ranch cost‑sharing), and the Shed Road landscape project (options to be presented May 12, 2025). Enterprise fleet leasing and equipment purchases were also reviewed.

Key Outcomes

• Council directed staff to adopt the maximum property tax levy (rate 0.9769) for FY 2025‑2026, with the increase included in the budget ordinance and public hearings.
• Council provided guidance to pay off two water and two wastewater WIFA loans (total ~$2.8 million) from uncommitted fund balance, subject to final budget approval. This frees up bonding capacity for water and sewer infrastructure.
• Staff will bring options for the Houser Waterline Extension to the April 14, 2025, Council meeting, with construction to begin July 1, 2025 if approved.
• The Shed Road landscape project will be reconsidered with scaled‑down options; a presentation is scheduled for May 12, 2025.
• The budget calendar includes individual Council budget meetings the week of April 22–May 2, 2025, and a full budget presentation on May 19 (and May 20 if needed).
• Staff will evaluate the feasibility of incorporating equipment costs into the Enterprise lease program for police vehicles.
• The next steps include monitoring revenue trends, incorporating state‑shared revenue updates, and preparing the final budget for adoption in May.