Debates on how Scottsdale will respond to long-term water challenges again dominated city budget discussions.

With the current budget ending June 30, the new one is likely to be approved at City Council’s June 9 meeting, after another presentation May 19.

At the May 5 City Council meeting, City Manager Greg Caton – as he was in previous Budget Review Commission meetings last month – was grilled about the city’s budget commitment on water projects.

Caron reiterated a previously reported letter to City Council, in which he led with the new budget “totals $2.119 billion, representing a decrease of $84.7 million, or 3.8%, from the prior year.”

This time last year, a slide presentation advertised Caton’s first budget as – curiously enough – “3.8% Decrease From Prior Year.”

The 2025-26 overall budget was $2.2 billion, down from the 2024-25 budget of $2.3 billion, which in turn showed a decrease from the $2.5 billion 2023-24 budget.

But, while capital improvement projects were down significantly in Caton’s first budget, the 2025-26 operating budget – every-day costs to run the city – showed an 8% increase.

At the May 5 meeting, Caton said he directed department heads to do “a scrubbing of the budget line items.”

His bullet points:

  • Departments tasked with identifying up to 10% reduction in base budgets and 2% reduction in vacant positions; 

  • Budget reductions to offset strategic investments and cost inflation pressures;

  • Minimize use of reserves to ensure sufficient rainy day funds.

Caton stressed he wasn’t cutting “across the board” – indeed, he highlighted boosts in public safety: 

  • $4.8M additional compensation for Police and Fire recruitment and retention;

  • $8.6M increase in Fire Department Budget for Phase III Ambulance, staffing and workforce development;

  • $2.0M in additional PSPRS contribution for Fire;

  • $69M in public safety capital improvements (includes $48.3M in carryforwards).

Caton’s proposed budget also includes $46 million for “pavement overlay” and $212 for “other transportation projects,” and $330 million for “water and water  reclamation capital improvements.”

And – with City Council’s permission – the city manager wants to toss $8.7 million to WestWorld, $32 million to Tourism and Events and $3.2 million for “improvements at Scottsdale Stadium.”

Questions? Comments?

After a presentation on water, Councilwoman Solange Whitehead – who has expressed alarm that Advanced Purified Recycled Water (APRW) capital costs were not in the budget – asked for more details.

After Caton started to give an extended answer, Whitehead interrupted.

“My question is very specific: are the rate payers getting what they’re paying for, what they are expecting, which is that these dollars fund the strategic plan project is horrible, and those, one of the projects that is considered most urgent is the APRW, which we just call pure water,” Whitehead said.

“Does this (budget) fund APRW – or does it give staff some leeway to change the policy administratively?”

“The answer is yes,” Caton responded.

Whitehead and Caton then got into a back and forth on if funding was present for what is known as “recycled water” – referred to by some as “toilets to taps.”

Whitehead said she was not clear about Caton’s answer.

“I’ll be looking forward to a work study session,” Whitehead said.

Mayor Lisa Borowsky then chimed in: “We are not going to be funding a project we have no idea what it costs.”

Responding to a Borowsky question on APRW funding, Caton responded, “some of that uncertainty is settled, and then we’ll return to council on that discussion over the next six to nine months.

“And then that will prepare us a year from now, then we will have the decision whether we move forward with acquisition of new water or that project,” Caton said, referring to APRW, also known as Advanced Purified Water or APW.

Councilman Barry Graham said it was not a simple yes or no on “Are we doing toilet to tap or are we not doing toilet to tap this year?”

Graham referred to a “$100 million placeholder” as reasonable.

“It gives us flexibility,” he added.

“The toilet to tap concept – ADEQ is developing standards, those are changing … nobody else does that in Arizona, not a single municipality pumps that into their drinking supply.”

During the subsequent call for public comments, Linda Milhaven shot back at Graham.

“To call recycled water ‘toilet to tap’ is irresponsible,” the former councilwoman said.

She said Caton’s budget eliminated $68 million for the APRW program.

“We are losing time” by not funding the project, she said.

More numbers

After the departure of Jim Thompson, Caton was appointed city manager (first on an interim basis) in early 2025.

His first budget showed the total operating budget – including a $50 million transfer to the police/fire state pension fund and $12.5 million transfer from the capital budget – increased last year by 16%.

Not so, this time around.

The proposed 2026-27 Scottsdale budget shows a 5.3% decrease in operating expenditures (dropping from $885 million to $838 million) and total operating budget decline of 5.4% (falling from $1.23 billion to $1.163 billion).

But “contingencies and reserves” also drops, by 5.7% (from  $344 million to $325 million).

“This budget reflects a thoughtful and disciplined approach to aligning our resources with community priorities while maintaining Scottsdale’s long-standing commitment to fiscal responsibility and service excellence,” Caton said, in his letter to City Council last month.

“Scottsdale continues to maintain a strong financial position, supported by disciplined financial management and a commitment to long-term sustainability.”

The city projects slightly fewer employees – with current workers receiving raises: a 3% “merit increase,” a 1% “market adjustment” and “a one-time 1% payment for employees at the top of their pay range who are not eligible for merit increases.” 

According to Caton, “These investments ensure we remain competitive in a challenging labor market while recognizing the contributions of our employees.”

Even with the raises, “personnel services” drops in the proposed budget by 5.7%, from $430 million to $405 million.

Caton highlights “the net elimination of 8.33 FTE (full-time)  positions.”

The current budget’s full-time worker count of 2,797 will drop to 2,789.

Another major factor in the personnel cost line decrease is the huge cut of last year’s $50 million transfer to the police/fire state pension fund; this year’s contribution to the public safety retirement fund will be $2 million, according to Caton’s proposal.

The “contractual services” budget line increases by 3%, from $223 million to $229 million, due to a $5.8 million increase in healthcare costs, a $1.6 million increase in the Tourism

Development Fund and $4.3 million increase in Water Resources.

Mayor’s take

At the May 5 meeting, Mayor Lisa Borowsky – who has frequently clashed with the city manager – praised Caton.

“I challenged the city manager to reduce spending by 10% across the board … I’m glad you met the challenge,” Borowsky said.

“I still think there’s room to sharpen the pencil and drill down a little bit more,” she added.

Overall, Borowsky said, “I do think this is a great starting point. We’re in a really good spot.”