Finance director warns expenditure growth outpacing revenues; projects $5.4M gap in FY2025–26

Melissa Cabrera, director of finance, told the council on Jan. 10 that while nominal general fund revenues rose from about $74.4 million in 2021 to $84.0 million in 2024, inflation‑adjusted revenue is down roughly $11 million (about 14.5 percent) over the same period.

Cabrera said the city’s top three general fund revenue sources—pilots, sales tax and franchise fees—make up about 65 percent of general fund receipts and that sales tax is susceptible to economic cycles. “We have a negative economic growth rate of 1% over the past 12 months compared to a 2.6% increase in CPI,” she said, citing a $15.3 million decline in brick‑and‑mortar retail sales since October 2023 and a $2.4 billion local retail economy baseline.

The nut graf: Cabrera told council that unless the city adopts structural changes, rising expenses—especially personnel costs, health care and overtime—will outpace revenue growth; staff currently projects a $5.4 million general fund shortfall for fiscal year 2025–26 under current service levels.

Key figures Cabrera presented: projected total general fund revenues for FY2024–25 of $83.9 million (about $1.5 million more than budgeted), a projected FY2025–26 funding gap of $5.4 million if current service levels continue, and recent use‑tax growth driven by online retail that has slowed after earlier strong gains. She said use tax and online retail receipts have been a partial offset: the city’s online retail/use tax economy measures roughly $380 million and showed an 11 percent growth rate over the prior 12 months, though the pace has decelerated from prior years.

Cabrera identified several budget pressures: potential loss or pause of grant funding (she estimated about $1.4 million in billed services through November that could be affected), rising healthcare costs (single‑digit to near‑double‑digit annual increases expected), and overtime and personnel costs that have grown in several departments. She said the city remains in compliance with reserve requirements at midyear but emphasized that continuing to defer capital investment would worsen long‑term maintenance costs.

Councilmembers asked about budgeting approach and long‑range planning; Cabrera and city manager Zach Walker said staff will employ priority‑based budgeting, department program cost assignments, and continued economic development to increase revenue. Walker highlighted ongoing recruitment, economic development projects such as Crossroad Materials and Little Blue Valley expansion, and the need to balance capital and operational spending.

Ending: Cabrera said staff will continue to refine projections, update department budget submissions and return to the council with options to address the projected gap; councilmembers urged continued fiscal discipline and public communication about tradeoffs.