Midyear budget review: finance staff project multi‑million shortfall, warn Public Safety Sales Tax fund will be largely drawn down

City finance staff told the City Council Finance Committee on Jan. 16, 2025, that the city faces a multi‑million dollar operating shortfall this fiscal year and that salary and benefit growth is the primary driver of the gap.

Mister Francisco, the finance presenter, said the city began the fiscal year with an available fund balance near $17.7 million and that, under current assumptions, the general fund is projected to run a net deficit of about $5 million in the current fiscal year. “We’re estimating that we will lose about $5,000,000 this fiscal year,” Francisco said, and urged the committee and council to “course correct” during this year’s budget process.

Why it matters: growing personnel and pension costs and capital obligations tied to the Public Safety Sales Tax (PSST) risk crowding out other city services and require council decisions about reserves, debt and potential new revenue tools.

Major points from the review

- Salary and benefits: Francisco said aggressive wage increases, added steps and cost‑of‑living adjustments in recent years are producing rapid expenditure growth in personnel lines. He noted an upcoming state pension formula change that will raise the city’s pension cost by about $400,000 on July 1.

- Public Safety Sales Tax Fund (PSST): The fund began fiscal year 25 with a carryforward balance of about $2.6 million from FY24 but is projected to end this fiscal year with only about $221,000. Francisco said roughly $11.7 million of the $12.9 million forecast in PSST receipts goes to salaries and benefits for police and fire. The FY25 projection includes an unusually large capital‑purchase estimate of about $2.3 million (including an expected ~$2 million fire truck) and about $2.3 million in debt service that will continue through March 1, 2027.

- Capital obligations and fire stations: The PSST ordinance obligates the city to rebuild Fire Station 5 and move it back toward town; staff warned the new station could cost much more than earlier estimates. Francisco and the fire chief discussed recent estimates in the $6–7 million range, noting that a $7 million cost would be “a bargain” compared with some recent projects. Staff said building a new station is the easier piece; staffing a new station — which could require roughly 30 additional personnel and about $1 million in ongoing annual costs — is the larger, ongoing fiscal commitment.

- Debt and timing: Staff reminded the committee that bonds issued in 2016 financed prior PSST projects and that debt service on those bonds will end in March 2027; however, continuing capital obligations (new apparatus and stations) mean the PSST revenue stream is unlikely to fully free up discretionary funds when that debt service ends unless the city issues new debt.

- Griffin and Sutton parkland purchase: Francisco said council has set aside what he described as about $6 million from reserves for potential purchases of Griffin Parkland and Sutton Wilderness Parkland. He said the State of Oklahoma provided a draft purchase and sale agreement template to facilitate a transaction but that an exact purchase price remains to be filled in; staff said they expect to bring a purchase and sale agreement to council for approval this fiscal year if negotiations conclude.

- Rainy day fund: The city’s revenue stabilization (rainy day) ordinance requires a midyear determination. Francisco reported that the fund will exceed the 4 percent statutory minimum by roughly $467,000 at year‑end but is about $615,000 short of its targeted level; council could choose to deposit reserves to hit the target if purchase costs of parkland come in under budget.

- Revenues: Sales tax receipts have been strong — Francisco said January was the highest sales tax month in the last five years — but use tax was down in the most recent month, reflecting a one‑time comparison to a large NextEra transaction recorded the prior year. Staff projected a modest sales‑tax growth trend rather than steep gains.

Operational observations and council questions

Council members and staff discussed overtime costs and whether hiring additional officers reduces overtime. Francisco cautioned that hiring often does not quickly reduce overtime because arrests, court appearances and scheduling realities can keep overtime persistent. He said the “average police officer … makes about $15,000 a year” in overtime historically and that overtime represents a significant portion of police compensation.

Council members asked about how PSST funds are used; staff said PSST covers salaries, equipment and debt service for public safety and that the fund’s obligations will continue to limit flexibility. Members discussed policy options including diversified revenue sources, public‑safety districts, and potential state‑level reforms to municipal funding structures.

Decisions and next steps

No formal fiscal decisions were made at the meeting. Staff said they will return to the council with budget recommendations and options to “course correct” during the budget development process, including proposals to constrain personnel growth, reexamine capital timing, and consider revenue diversification. Francisco and staff will provide more detailed budget proposals in subsequent budget sessions.

Ending: Finance staff closed the midyear review by reiterating that personnel costs — not a lack of revenue — are the primary driver of the projected deficits and that council direction will be needed to adjust service levels, reserves and capital plans going forward.