CFO Andre Walker presents Memphis debt budget exceeding $199M for FY 2026

The Memphis City Council convened on May 5, 2025, for a budget hearing focused on the fiscal year 2026 budget, with significant discussions surrounding the city's debt management and financial strategies. Chief Financial Officer Andre Walker presented a detailed overview of the proposed budget, which totals approximately $199.9 million, primarily allocated for debt service.

Walker highlighted that the budget includes $130.5 million for principal payments and $68 million for interest, emphasizing the importance of timely debt service payments. He noted that the city has successfully met its debt obligations over the past five years, a key performance metric for the financial team.

The council reviewed a multi-year budget comparison, revealing an increase in principal payments of $11.7 million from the previous fiscal year, attributed to new bonds issued in 2025. The budget also anticipates a drawdown of $19.2 million from the committed fund balance, which is projected to leave approximately $23 million at the beginning of FY 2027, aligning with the city’s goal of maintaining a fund balance of $15 to $16 million.

Walker addressed potential challenges, including the risk of changes to the tax-exempt status of municipal bonds, which could raise borrowing costs. However, he noted that recent trends indicate a diminishing likelihood of such changes. Additionally, market volatility has prompted the city to incorporate flexibility into its financing schedule to mitigate risks associated with bond sales.

Council members engaged in discussions regarding the city's spending patterns, particularly an increase in capital expenditures from $8.6 million to $9.1 million per month. Walker explained that this uptick is due to a push for quicker utilization of funds from the Accelerate Memphis program, which aims to expedite capital projects and avoid penalties from the IRS related to unspent bond proceeds.

The meeting concluded with a consensus on the need for continued vigilance in managing the city’s debt portfolio amid fluctuating interest rates and economic uncertainties. The council anticipates further discussions on potential bond issuances to address commercial paper obligations in the near future, ensuring the city remains proactive in its financial planning.