Keene staff outline revenue mix, warn ARPA funds are one-time

Keene finance staff presented projected revenue sources for the fiscal year 2025–26 at a July 10 special budget workshop, telling the City Council that property tax makes up the majority of the city’s ongoing revenue and that a large American Rescue Plan Act reimbursement recorded in the current year should not be counted as recurring income.

The presentation, led by Finance Director Mary and introduced by the city manager, showed that 53% of year‑to‑date revenue came from property tax, 11% from sales tax (after local allocations), and an unusually large 31% of revenues categorized as “other miscellaneous income.” Staff said much of that miscellaneous revenue reflected a one‑time ARPA reimbursement of about $858,000 and a one‑time Blue Cross Blue Shield refund of roughly $88,000.

City staff said counting the ARPA reimbursement as recurring revenue would overstate the city’s baseline finances and urged a conservative budgeting approach. “ARPA was completely obligated and fully expended as of April 29,” the presenter said; staff flagged the need to remove that amount from baseline revenue assumptions going forward.

City manager and finance staff framed the workshop as the start of a multistep budget process that will push departments to justify service levels and itemize recurring costs. The manager said the goal is to move from a checklist approach to one where accounting “tells the story” of the city’s finances, and to give department heads more control and responsibility in requesting funds.

Key figures and assumptions - Property tax: Staff reported property tax accounted for roughly 53% of year‑to‑date revenue and used a conservative 2.5% growth assumption for the FY2025–26 tax roll pending the official appraisal roll expected July 25. - Sales tax: Sales tax was presented at about 11% of projected revenue after the city’s EDCA/EDCB allocations; year‑to‑date numbers showed a lower share (about 7%), but staff said two new retail commitments should lift receipts and budgeted sales tax modestly above recent actuals. - Other miscellaneous income: The staff noted a $858,000 ARPA reimbursement and an $88,000 Blue Cross Blue Shield refund in the prior year drove a 13% jump in “other” income; staff warned neither item is likely to recur. - Interest income and cash management: Staff said they negotiated a fixed roughly 4% interest rate on money market accounts with Pinnacle Bank and recommended improving cash balances before placing funds in longer‑term vehicles such as bonds. - Development and permits: Development services revenue was budgeted conservatively at $400,000, based on a scenario of 90 new permits in the coming year (30 from The Canyon, 30 from Sunset Ridge, 20 from Ashton, 10 from Stonehurst). Staff said earlier estimates of 375 houses were reduced to 90 after recent builder feedback. - Enterprise funds: Water and sewer enterprise revenue is expected to rise modestly (about 5% overall) based on the 90 homes projection; staff cautioned grant reimbursements previously shown in enterprise revenue are reimbursement‑type flows, not new recurring revenues.

Fire department revenue plan Chief Warner and Captain Metcalfe were cited in the presentation as proposing participation in the Texas Intrastate Fire Mutual Aid System (TIFMAS). Staff said TIFMAS requires an initial city investment—presenters named $19,000 as the up‑front cost—but that one week of a deployment could recover that cost and then produce net revenue while providing training and operational experience. Staff said they will return to council with a formal request if council wants to proceed.

Budget process changes and administration cost review Staff described procedural changes: departments will input needs into the budgeting software, present objectives and service levels, and justify line items rather than accepting across‑the‑board percentage increases. Staff also flagged a longstanding administrative transfer from the enterprise side (an historical $360,000 figure) that appears to lack current documentation; staff proposed reviewing allocation methodology and possibly increasing the administration transfer to reflect actual fixed and personnel costs.

Councilman Smith and other council members thanked staff for the detail and for the use of tools allowing line‑by‑line comparison to prior budgets. Several council members asked about timing, the treatment of one‑time items, and whether fee schedules (community center, facility rentals, permit fees) would be revisited to capture additional non‑tax revenue.

Why it matters Staff emphasized that without additional recurring revenues or growth in sales tax and development, the city risks having to raise taxes or cut services at future budget approvals. The finance presentation framed a conservative budgeting stance to avoid basing recurring spending on one‑time receipts.

What’s next Staff said they will continue department budget meetings over the next days, refine revenue assumptions once the appraisal district provides the tax roll, and return to council with more detailed requests—including a potential TIFMAS authorization and proposed revisions to administrative allocations and the master fee schedule.