Council hears long-range financial forecast showing multi‑million dollar annual gap, task force to propose packages

The City Council heard a presentation from consultant Baker Tilly and the city’s finance director on the city’s long‑range financial forecast and the work plan for a fiscal sustainability task force. The forecast uses the adopted 2025–26 budget as a baseline, incorporates conservative assumptions about revenue and inflation and models a mild recession in 2027. It projects an average annual general‑fund gap of roughly $3.2 million and shows the city could fall below its minimum reserves by 2028 without corrective action.

The city manager introduced Steve Toler, director at Baker Tilly, and Sergei Solomonen, the city’s finance director, who walked council through the new model and assumptions. Toler said the forecast is a diagnostic tool tied to the council’s financial policies and reserve targets and that the city now has a dynamic fiscal model staff and the task force can use to run “what‑if” scenarios. He recommended the council consider raising the minimum reserve target above the current 5% of annual operating expenditures; Baker Tilly suggested a 20% target as a prudent goal given the city’s revenue mix and volatility.

The forecast assumptions presented to the council included: continuing the 1% allowable annual property‑tax increase, 3.5% baseline revenue growth for sales and inflation, no new debt, an assumed mild recession in 2027 and limited expectations for large new development revenues. On the expenditure side the model used a 4% placeholder salary growth, 5% fringe‑benefit growth and a 5% vacancy/expenditure savings assumption in out years. Baker Tilly and staff noted that personnel costs are roughly two‑thirds of general fund spending.

Toler told council that under the baseline assumptions the gap averages about $3.2 million per year and grows over time because revenues tied to property tax are constrained while expenditures rise faster. If the council seeks to target a 20% reserve goal and avoid drawing down the city’s reserves, the consultant estimated the city would need about $4.8 million a year in ongoing strategies phased over multiple years (roughly $1.6 million per year over three years) with additional one‑time or phased steps later in the decade.

Council members asked for clarity on how the forecast would be used and how packages would be constructed. Toler said the fiscal sustainability task force will examine a menu of strategies that can include revenue enhancements, expenditure controls, service‑delivery changes, or combinations of those approaches; the packages will be flexible so the council can mix elements. Several council members and task‑force participants praised the model for its dynamic scenario capability and asked staff to make public materials and engage the community before any final policy changes.

Staff said midyear updates from finance will be incorporated into the model and that the fiscal sustainability task force will present recommendations to council in early 2026, with an expected set of options by about February. Councilmembers expressed support for public engagement on possible revenue and expenditure options and asked staff to report back with more detail about the sales‑tax composition (including how much is local point‑of‑sale versus remote/online sales delivered to the city).

No formal motions or votes were taken during the presentation. City staff and Baker Tilly will continue model refinement, provide periodic updates to the fiscal sustainability task force, and present packaged options to the council for policy decisions.

Ending: Councilmembers generally welcomed the forecast and the task‑force approach; they emphasized the need for public engagement and noted that the city’s current reserve balance gives some runway to adopt phased solutions rather than abrupt cuts.