The City Council voted to set the 2026 tax rate not to exceed the voter-approval rate of $0.227427 per $100 of assessed value, a move council members said preserves flexibility as staff works to close a growing gap between revenues and expenses.

The vote followed a staff budget presentation showing the proposed budget published last Friday was prepared at the current tax rate but that “personnel costs are the largest growth” and are outpacing revenue, Krista, a city finance staff member, told the council. Krista said general-fund personnel costs are about 51% of general-fund expenses and that personnel growth over three years represented roughly $2.7 million in higher costs.

Council members and members of the public debated the tradeoffs of raising taxes versus cutting services. The mayor framed the choice bluntly: “We have to raise that blue line then. Is this the council that wants to do that?” the mayor said, urging colleagues to consider whether to increase the tax base now or defer the decision. Several council members said they favored a modest, steady increase over time rather than abrupt cuts to services.

Staff described specific budget changes built into the proposed plan. Krista said revenues in the draft moved from roughly $71.8 million at the July 9 presentation to about $73.5 million in the current proposal, while expenses fell from $81.6 million to about $81.1 million after personnel-request adjustments. The proposed budget removed five new employee requests and trimmed merit and cost-of-living adjustments (COLA) compared with earlier drafts to limit required new revenue.

Council discussion flagged other cost drivers and possible revenue options. Projects noted in the presentation included a city hall move and furnishings, debt service for planned equipment, and capital items carried from 2025 such as a $325,000 water project. Council members asked about tourism and enterprise-fund projects funded by hotel occupancy taxes, potential parking revenues, and the fiscal effect of annexations.

Citizens and former officials urged caution in setting policy because of recent sharp commercial valuation increases. “Y’all values are higher than in the metro cities,” a commenter warned, noting a consulting firm’s reappraisals and saying that commercial land values in some downtown blocks have climbed dramatically. Council members said the appraisal process is state-regulated and recommended talking with the appraisal district for details.

The motion to set the tax rate not to exceed $0.227427 per $100 was made and seconded on the council floor and adopted by voice vote. The council set a public hearing for the budget and, if required by the chosen rate, for the tax rate on Sept. 9, as staff noted in the meeting timeline.

Budget staff and council members directed staff to prepare line-item explanations in OpenGov for increases and to return with additional information before final adoption. Council members emphasized they wanted a department-level review of services and staff requests before making further personnel reductions or service cuts.

The council’s action preserves room to adopt a final tax rate later in the budget process, while signaling that the council is weighing incremental revenue increases against potential service reductions and other revenue-generation options.

Looking ahead, staff said interest income and property-tax base changes remain uncertain and that personnel remains the key long-term pressure. The city will hold required public hearings and return to final budget adoption on the schedule published by staff.