City Manager Mark Ziegler told the Shelton City Council at a Sept. 23 study session that the city’s preliminary general fund budget for 2026 shows an approximate $1,130,000 shortfall and asked the council for direction on how to prioritize one‑time and ongoing requests. The discussion included department requests, the city’s 20% reserve policy and a proposal to use part of the unreserved fund balance while the council considers funding options.

Ziegler said the meeting was “intended to be an interactive process” as staff refine the preliminary budget and prepare for the legally required November preliminary budget submission and subsequent public hearings. He reviewed a calendar that places the preliminary budget decisions with the leadership team in early October, the required preliminary budget notice in early November and the final hearing and adoption in December.

Why it matters: The council’s 20% reserve policy and the size of the unreserved fund balance will constrain choices about adding staff or ongoing services. Ziegler said staff have “busted their **** this year” to improve reserves but warned that relying on one‑time fund balance to pay ongoing expenses is not sustainable.

Ziegler told the council the adopted 2025 budget included roughly $15.9 million in revenues and $17.0 million in expenditures, with a beginning fund balance around $6.3 million and a policy reserve of 20%. Under the 2026 proposed baseline (the purple budget shown to council), staff removed one‑time 2025 expenditures, added known recurring costs (contract inflation, vehicle lease commitments, anticipated COLAs and benefit cost increases) and retained placeholders for uncertain items such as grants or interagency contributions. He said that, after adjustments, the proposed budget showed about $1,130,000 in additional planned use of unreserved balance to accommodate department one‑time and ongoing requests.

Ziegler walked council through a breakdown of one‑time requests, ongoing commitments and how those proposals would reduce the unreserved fund balance. He illustrated that the city’s beginning fund balance of roughly $6.3 million yields a 20% reserve requirement of about $3.3 million, leaving $1.9 million unreserved in the 2025 adopted budget. Staff estimated the 2026 proposed one‑time and ongoing items would bring the unreserved balance down materially if adopted without additional revenue.

Council discussion focused on tradeoffs between maintaining service levels (especially public safety), staffing and using fund balance for one‑time needs versus committing to ongoing costs. Several council members pressed staff on which vacancies or timing contributed to the apparent shortfall and whether some position fills were excluded from the 2026 baseline. Ziegler confirmed two positions budgeted in 2025 — a patrol officer and an administrative support position in public works — were not included in the proposed 2026 baseline and that timing of hires and interim staffing had caused intermittent savings in 2025.

Staff recommended a conservative approach to avoid hiring plans that would outpace sustainable revenue, noting training and hiring timelines (for example, 8 months of academy training for new officers) make mid‑year layoffs or reversals costly. Ziegler said, “we'd much rather be conservative budget[ing]…and then we're not making negative corrections. We're potentially making positive corrections.”

The council directed staff to return with refined options. Ziegler asked for clear council guidance on (1) acceptable use of unreserved fund balance in 2026, (2) whether council prioritizes adding ongoing public safety staffing, and (3) which one‑time projects should be advanced to the preliminary budget.

The study session later adopted a procedural motion to extend the meeting 30 minutes, approved by voice vote.

Looking ahead: Staff will produce the preliminary budget materials for council review and public notice in October and November, refine department requests based on council guidance, and return with grant and revenue analyses (including options for public safety grants and sales tax measures) prior to the November preliminary budget submission.