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City presents FY2026 proposed budget; staff recommends use of reserves and transfers to balance gap
Summary
City staff presented a high-level overview of the proposed FY2026 operating budget, outlining revenue assumptions (flat mill levy, sales tax growth) and options to close an estimated gap, including reserve draws, transfers from internal service funds, fee adjustments and potential future revenue measures.
City staff on July 15 presented a high-level overview of the proposed FY2026 operating budget and described assumptions and options the governing body can use to close a projected shortfall.
Josh McInarney, budget and finance division director, said staff assumed a flat mill levy of 36.956 and projected property-tax revenue using a 96% collection rate. Sales-tax assumptions use 2024 collections with a 2.25% compounded growth projection; staff said a 3.25% assumption would materially increase revenue. Staff proposed several measures to close an estimated shortfall: use of the city's unassigned reserves (previously discussed draw of about $9.45 million), transfers from internal funds (workers' comp and retirement reserve), modest fee adjustments (administrative charges to enterprise funds), freezing or reducing some FTE hiring, and possible future revenue measures such as a sales-tax initiative.
McInarney said the budget baseline includes personnel costs that total roughly $100 million of the general-fund expenses and that without using built-up fund balances the city would project a $7.5 million deficit for 2026. He described proposed transfers (workers' comp infusion of about $2.2 million and a $2 million transfer from the retirement reserve to shore up the special highway fund) and emphasized the city expects to remain above its 15% minimum reserve policy in 2026 if council approves staff recommendations.
Staff noted several funds other than the general fund require attention, including the special highway fund (gas-tax-based) and the parking fund. Department-level budget hearings will continue in August; a revenue-neutral hearing and final adoption are scheduled for later this summer with a potential council adoption date in September.
Councilmembers asked staff to reference budget-book pages during department presentations and to publish the proposed budget materials online; staff confirmed the materials are available to the public and department presentations will reference page numbers for clarity.
