City finance staff told the Budget Committee that the proposed fiscal year 2026 budget faces a structural shortfall and relies on a mix of one-time and recurring measures to maintain services.

"This year's budget process has proven exceptionally challenging with difficult decisions necessary to maintain the city's financial health," Gloria Butch, the city finance director and budget officer, said as she opened the FY2026 presentation.

Butch said the general fund was showing a shortfall in the multi‑million‑dollar range and that the city had used nonrecurring revenue in prior years to soften the gap. She said the city's general fund reserve target is 20% and that without revenue adjustments the fund balance would fall below policy levels. The committee was presented scenarios showing how different fee levels and revenue mixes would affect reserves over a five‑year forecast.

Butch also related the city's recent credit rating action. "As a result of the declining fiscal health of the general fund ... Standard & Poor's downgraded the city's credit ratings from double-A to A stable," she said, adding that the city continued to seek stable revenue sources.

For enterprise utilities, staff recommended modest rate increases to fund capital projects identified in updated master plans: a 2.9% water increase (estimated impact about $0.75 per household per month), an 8.1% sewer increase (estimated impact about $2.43 per household per month) and a 19‑cent monthly storm adjustment. Butch said an updated rate study is budgeted for fall 2025 to refine assumptions.

Staff also flagged a $10,400,000 sewer main upsizing project in a basin currently over capacity; the plan assumes related debt issuance incorporated into rate forecasts. Capital projects highlighted included riverfront and Columbia View Park improvements, completion of downtown infrastructure and portions of an industrial business park sale intended to return property to the tax rolls.

Committee members pressed staff on the assumptions behind the five‑year forecast and asked for a timeline showing when the downward trend in the general fund began. Several members suggested combining revenue and cost-control measures (fees, furloughs, COLA reductions and sale of surplus property) to limit impacts on residents.

Ending: Staff will return with more granular forecasts, departmental cost details and a Q&A addressing committee questions for the next meeting.