Town staff presented a suite of revenue and fee proposals at a study session Oct. 1, asking the Town Council to consider three new local tax categories and increases to parks-and-recreation and stormwater fees to address structural budget pressures and rising pavement-preservation and public-safety costs.

Paul Gephardt, the town’s chief financial officer, framed the proposals around the council’s strategic-plan goal to safeguard town finances. He told council the town faces a structural gap in which operating expenditures — driven largely by rising police costs and road-maintenance inflation — are outpacing revenue growth. "Without these proposals ... the maintenance is going to be a challenge," Gephardt said. He summarized the town’s financial position with several figures supplied during the presentation: general fund revenues about $56.6 million in FY25 and projected $61 million in FY26 after migration of a half-cent community-center sales tax to the general fund; recent reduction of the general fund reserve policy from 30% to 25%; and a baseline five-year fund-balance forecast that would decline substantially without new revenues.

Key staff proposals and figures
- New tax categories: staff proposed adopting local use tax, commercial rental tax and telecommunications tax categories (rates proposed to mirror Oro Valley’s general sales tax rate of 2.5%). Staff said these categories exist in the code but currently have a zero rate. Gephardt showed that neighboring jurisdictions (Marana, Sahuarita, Tucson) levy similar taxes and that 69% of Arizona cities and towns charge a use tax. He described the use tax as primarily affecting businesses that purchase goods out-of-state and do not pay sales tax, the commercial rental tax as affecting landlords (who could pass costs to tenants) but not residential rentals (apartments), and the telecom tax as primarily assessed on wireless providers and likely passed to consumers.
- Financial scale: staff cited a consultant estimate of $1.18 billion in retail "leakage" (resident purchases made outside Oro Valley), which at Oro Valley’s 2.5% sales-tax rate equates to about $29.5 million in potential sales-tax-equivalent revenue. Gephardt said a $1–1.5 million annual revenue stream from new taxes would materially improve the town’s five-year fund forecast and provide greater stability.
- Pavement preservation: Gephardt reported pavement-preservation costs have increased roughly 107% since 2021 (from about $1.5 million to over $3 million annually), forcing transfers from the general fund to sustain road work and contributing to the structural imbalance.
- Parks and recreation fees: staff proposed modest increases to memberships and rentals, with an emphasis on differentiating resident and nonresident rates. Matt Wood, vice chair of the Parks & Rec Advisory Board, said the board unanimously supported the proposal, noting a nonresident pickleball rate increase from $5 to $10 in the proposal. Wood said staff benchmarked fees to market.
- Stormwater utility fee: staff proposed increasing the monthly stormwater fee from about $4.50 to $6.50 per month (a $2 monthly increase) assigned to capital projects for stormwater improvements. Staff offered a phased implementation option over three years to soften the immediate impact on customers; during the meeting staff described a three-year phase with roughly two payments of about $0.67 and a third year of about $0.66 to reach the $2 per month total.

Public and business feedback during the meeting
Small-business owners and residents spoke during the study-session public comment segment. Jeffrey Laird, owner of Wow Wow Lemonade, said consumer spending is down and added costs from inflation, tariffs and new taxes would squeeze small businesses operating on narrow margins. "Small businesses are fighting for every consumer dollar we can get right now," Laird said and reported his 1,400-square-foot lease, including CAM, at roughly $4,500 per month.

Commercial real-estate agent David Blanchat and long-time resident Mike Smeckel urged caution in adopting a commercial rental tax, warning it could deter new business growth; Smeckel said he has observed a relative stagnation of business growth and urged council to consider long-term impacts on leakage and business attraction.

Council discussion and staff responses
Councilmembers asked multiple questions about alternative options — further budget reductions, use of reserves, phased tax implementation, and the effect of near-term new development such as the Marketplace apartments on sales taxes. Staff responded that the five-year forecast did not include speculative future annexations or full build-out of developments (the forecast was a conservative baseline) and that the half-cent community-center sales tax migration increased the general fund but did not address the structural gap. Gephardt said staff’s belt-tightening measures have produced roughly $3.7 million in savings but "they simply are not enough." Councilmembers signaled varying comfort levels: several expressed openness to a phased approach and to assigning new revenues to capital (public safety, roads and stormwater), while others asked for more time, more detailed job-and-cost analyses and clearer modeling of how newly approved housing (units already rezoned) would affect future revenue.

Next steps
Staff said they will return with refined recommendations and clearer phasing and implementation plans, including a written three-year phase for the stormwater fee and further discussions of timing and rate structure for new tax categories. The town scheduled a follow-up for Oct. 15 for final consideration.

Why it matters: staff presented the package as a set of measures intended to diversify revenue, stabilize the general fund and preserve core services — notably pavement preservation and police staffing — that officials said residents value highly.