Fond du Lac leaders outline balanced 2026 budget forecast, warn of limited flexibility

City Manager Joseph Moore and Director of Administration Tricia Davy told the Fond du Lac City Council on June 25 that the city will deliver a balanced 2026 budget in August but will have very limited flexibility because state rules limit annual levy growth and many revenue streams are outside local control.

Moore and Davy presented revenue and spending forecasts, a five‑year capital improvement plan and early results of a wage study as the council opened its long‑range budget review. "We're forecasting about 1%," Moore said when describing net new construction used to set the city's allowable levy growth. Davy added: "our tax levy can only increase by that amount or approximately 1%."

The presentation matters because the 1% net new construction estimate translates into a relatively small allowable levy increase — roughly $270,000 under the state's formula — against a total operating and capital program of about $40 million. That constraint, Davy said, means the city has little control over roughly 87% of its revenues (state aids, levy and interest income) and must rely on fee revenues and careful expenditure planning for flexibility.

Key points delivered at the meeting: - Net new construction: staff is using a conservative 1% forecast for 2026; the Department of Revenue publishes the official calculation based on municipality submissions. - Levy impact: Davy said the allowed levy increase under that forecast is about $270,000; staff noted that the levy is what the council sets and that revaluation affects tax rates, not the levy itself. - Budget size and composition: Moore and Davy described roughly $40 million in annual expenditures and identified personnel costs as the single largest operating expense. The city reported 327 permanent positions, 269 of which sit in the general operating budget; 153 positions are in unions. - Wage study: staff summarized an external review of about 157 positions. Moore said "84% of our positions were within 3% of the market," and that implementing the consultant's recommendations appears affordable. The consultant will present full findings at the July 23 council meeting. - Expenditure Restraint Program (ERP): Davy explained that ERP caps can limit allowable expense growth; in exchange, municipalities receive state aids (about $1 million annually for Fond du Lac). Choosing to exceed ERP formulas can create a significant budget shortfall if the city forfeits those aids. - Capital and TIF: staff confirmed the five‑year CIP remains largely unchanged from last year and said $1.7 million in excess Tax Increment Financing (TIF) increment from a closed industrial TID will be distributed per taxing‑jurisdiction rules; the city's share is being placed in the capital improvement fund to reduce borrowing. - Fund balance: staff proposed a conservative approach, applying less than 0.5% of the total budget in one‑time fund balance to help balance 2026.

Council members asked about how revaluation interacts with the levy, placeholders for union negotiations and whether new fee‑funded programs would affect ERP calculations. Davy said the ERP and related formulas focus on expenditures, not the revenue source, so new spending—even if funded by fees—can affect ERP calculations depending on accounting treatment and state guidance. Moore said the city will continue to monitor state budget timing and shared‑revenue decisions but did not expect delays to materially change the city's near‑term plan.

Staff outlined next steps and schedule: department presentations over the summer, a consultant report on the wage study at the July 23 meeting, the delivery of a balanced draft budget to council in August and tax bill mailings by the third Monday in December. Moore said the city will maintain current service levels but reiterated that there is "no flexibility" beyond the constrained revenue picture.

Questions and follow‑up direction included scheduling the wage study presentation and continuing negotiations with police and fire unions while using per‑capita placeholder allocations in the draft budget. The council took no formal action on the budget itself at the June 25 meeting; the session was an informational briefing to frame subsequent hearings and decisions.