City staff presents preliminary 2026 general fund budget; identifies $1.48 million shortfall for flat mill levy

City finance staff presented the commission with a preliminary view of the 2026 general fund budget and the major revenue and expenditure assumptions, saying a flat mill levy combined with department requests leaves a projected shortfall of about $1.48 million.

Finance Director reviewed major assumptions: an estimated 3% increase in assessed valuation, assumptions for city, county and consumer sales tax growth, and conservative interest income. The presentation included the expected allocation of ad valorem revenue to the airport and debt-service funds and showed the remainder available to the general fund if the commission keeps a flat mill levy.

Staff said department requests were generally reasonable and that, unlike the 2025 process, departments were not asked for immediate cuts; rather, staff will reconcile the revenue assumptions when county certified valuations arrive (estimated by June 15) and present scenarios to close the shortfall. The projected shortfall figure depends on the final county valuation.

What comes next: Staff asked commissioners to submit feedback on Capital Improvement Plan (CIP) priorities by email prior to the next pre-meeting and said staff will prepare revised revenue estimates and options for the commission to consider at the pre-meeting and at future budget hearings. Final decisions on any spending cuts or revenue adjustments will occur prior to budget adoption later this summer.

Why it matters: The general fund shortfall under a flat mill-levy assumption requires the commission to choose among spending reductions, revenue adjustments or use of reserves to balance the 2026 budget. The timing is important: county valuations and revenue receipts will determine final options and notice requirements for a revenue-neutral rate hearing and budget adoption schedule.