City budget shows nearly $1 million general-fund shortfall; railroad demands add $323,366

City Manager Brian told the City of Sebastian’s budget workshop on July 16 that the proposed fiscal 2026 general-fund budget shows a deficit of $923,178 at the current millage. "The budget before you all today does show a deficit in the general fund in the amount of $923,178 based on the current millage rate in f y 25 of 3.1955," Brian said.

The shortfall comes as staff asked councilors to weigh millage-rate options. Brian outlined the major choices and their likely revenue effects, including the rollback rate of 3.0148 and higher rates that would produce additional ad-valorem collections. He cautioned council that any decision to increase millage must be coordinated with the TRIM timeline: the tentative millage must be set for TRIM notices and changes after the TRIM notice are costly and time-consuming.

The budget remains subject to several unknowns that could change the numbers before adoption: ongoing union contract negotiations (including the Police Department and the Supervisors Unit), final property and liability insurance premiums, and the final health-insurance rate. Brian said the city’s health plan enrollment and prior decisions limited next-year health-rate increases to 7 percent, below market.

Separately, city staff said they received a notice of intent from Florida East Coast Railway identifying 2 crossings as city maintenance responsibilities under long-standing agreements. "The proposed cost for Barber Street is $232,818.12 and the proposed cost for Schuman Drive is $90,548.30 with a total proposed cost of $323,366.42," Brian said. He said those letters were dated July 15 and that the railroad had proposed starting work on Barber Street on Aug. 3. Staff are reviewing the agreements (dating to 1984 and 1959) and discussing options with the railroad but warned the city could face closure of crossings if it refuses to pay.

Brian said staff are evaluating funding options — including discretionary sales tax reserves and local option gas tax — and will recommend solutions as they finalize the millage and budget. He also noted the city’s change in reserve policy (holding $7 million) and that staff would return with recommended millage to present to the budget advisory committee and council later in July.

Why it matters: the budget deficit and the unplanned rail-crossing costs together increase pressure to raise revenue or cut spending. Council must set a tentative millage by the TRIM schedule this month if it expects notice to the property appraiser, and the railroad costs create a new immediate funding demand for the general fund.