City manager outlines paths to close $25 million budget gap as ARPA, tax changes bite

City Manager Trey Yelverton told the Arlington City Council on June 10 during an afternoon work session that the city faces roughly a $25 million fiscal gap driven by expiring American Rescue Plan Act funds, a voter-approved senior tax freeze and lower property valuations reported by the Tarrant Appraisal District.

Yelverton said the shortfall reflects several moving parts: ARPA-funded positions that end in 2026; the senior tax freeze, which cost about $3.5 million in lost revenue last year; conservative appraisals and an accelerated protest and litigation trend at the Tarrant Appraisal District; and upcoming state changes to the business personal property exemption that could cut approximately $2.2 million beginning in 2027. “I continue to tell you that I think we do a lot with a lot, but we’re highly efficient and productive in what we’re doing,” Yelverton said in his presentation.

Why it matters: the council must decide a mix of spending cuts, reserves, personnel reductions or a tax-rate change before the formal budget is presented in August and considered in September. Any choices affect services, personnel and the city’s competitiveness for employees.

Yelverton presented four broad options to close the remaining roughly $6.4 million gap after already identifying about $18.7 million in reductions: forego the proposed 3% employee pay raise (estimated $6.9 million); adjust fringe benefits and other personnel costs (a menu of changes Yelverton estimated could yield about $5.4 million if taken in full); use one-time reserves (he described a potential $4 million draw tied to a challenge-grant program to soften layoffs); or increase the property tax rate (one penny equals about $4.3 million). Yelverton emphasized combinations of the options would likely be used rather than a single path.

Council members sought more detail. Councilmember Bridal asked whether branch libraries — Woodland West in particular — could be consolidated or reconfigured to reduce costs; Yelverton said the finance and audit committee should evaluate deferred maintenance and operating costs for library assets. Councilmember Pham asked about a roughly $1.7 million revenue loss tied to “traveling HFC” transactions; Yelverton said that figure refers to projected loss for fiscal 2026 and that this year’s loss was likely smaller (he estimated “probably more like 700,000 or 800,000” so far). Councilmember Boxall urged caution about cutting public-safety equipment or code compliance staff; Yelverton and other council members stressed minimizing reductions to sworn fire and police staffing.

What’s next: Yelverton asked the council for direction and said staff will return with refinements in two weeks and a formal proposed budget in August. He asked the finance and audit committee to study library asset conditions and deferred maintenance and reiterated that public input and prior workshops had produced a set of more than 90 potential reduction items that staff is preparing to include in the proposed budget.

Ending: The council did not take formal action at the June 10 work session; Yelverton asked for feedback and scheduled additional committee work and another briefing before the August submittal.