Hobbs City staff flag large carryovers, propose "deconstructing" budget to free reserves

City Manager Manny Gomez and finance leaders told the Hobbs City Commission on May 5 that Hobbs City's high reported reserves overstate how much cash is actually available because of long-running encumbrances and carryover project funds.

"We will begin by deconstructing our existing budget to better understand the current spending patterns," City Manager Manny Gomez said, summarizing the administration's approach to the FY 2026 preliminary budget.

The deconstruction exercise matters because staff said the city's June 30 projected cash balance differs substantially from the reserve percentage used in the preliminary budget. Chief Financial Officer Toby Spears told commissioners the preliminary reserve figure was about 57 percent, but finance staff project about $88,000,000 in cash at June 30 after adjusting for likely unspent encumbrances and near‑term obligations. That gap reflects roughly $16,000,000 of encumbered items and about $14,000,000 of other budgeted items that may be reassessed, officials said. Toby Spears described the difference as a mix of carryovers, one‑time clawbacks and contract timing.

Commissioners and staff repeatedly returned to how those carryovers change the practical size of the city’s “savings account.” Commissioner Smith and others said having large unspent balances makes it harder to evaluate proposals such as changes to gross receipts allocations or new ongoing programs. Commissioners asked staff to provide more detail on specific encumbrances and recommended matching the capital plan (ICIP) to the budget to clarify which funds are truly restricted versus available for reallocation.

Staff emphasized compliance constraints and the timeline for formal action. Toby Spears said the city must submit a preliminary package to the Department of Finance and Administration (DFA) by June 1, present the preliminary budget to the commission on May 19, and return to the commission with a final budget for approval on July 21. Spears noted that DFA guidance drives some presentation items and reserve calculations.

The session closed with staff promising follow‑up detail on the largest encumbrances and a commitment to use the deconstruction process to produce a clearer 10‑year capital picture and potential sinking‑fund options.

Next steps: staff will provide the commission with the detailed carryover and encumbrance list as well as a proposed ICIP alignment ahead of the May 19 presentation to the commission and the June 1 DFA upload.