Topeka officials outline roughly $17 million general-fund gap and weigh sales-tax questions, cuts and hiring freeze

City Manager Josh McInarney told the Topeka City governing body on Jan. 9 that the city faces a projected general-fund shortfall for fiscal 2026 of roughly $17 million and outlined options including department reductions, a hiring freeze, changes to capital projects and up to six separate voter-approved sales-tax questions.

McInarney said the city recorded “about $11 or $12,000,000 surplus in 2023,” then moved into a position where revenue growth has stabilized and personnel and nonpersonnel costs have risen, producing the current projected deficit. He presented revenue and expense drivers — sales tax, property tax, franchise fees, transfers from enterprise funds (“pilots”) and compensation costs — and asked the governing body for direction on which levers to pursue.

The presentation summarized the major revenue trends: inside-city sales tax is 9.35%, with 1% dedicated to the general fund and a separate half-cent for citywide street repairs; sales-tax receipts surged in 2021–22 but have cooled, producing lower-than-projected collections in recent budget cycles. McInarney said 2024 sales-tax receipts were roughly half of a previously projected $6 million increase, leaving an approximately $3 million shortfall compared with that budget assumption. Property valuations that produced near-9% growth in prior years have slowed (2025 growth ~4.54%), and the city is projecting roughly 4% growth for 2026.

On the expense side, McInarney said personnel costs are the largest driver: the city’s weighted average increase for employees in 2025 was about 8.45 percent, with some union groups (he cited police as an example) receiving substantially larger increases. From 2024 to 2025 he said the city added about $8.5 million to the wage pool; the administration currently reflects a vacancy-credit assumption of about $1 million in the 2026 projection. McInarney also listed substantial nonpersonnel cost increases including a new enterprise resource-planning (ERP) system, higher inmate costs charged by the county, and ongoing street-light electricity charges from Evergy.

McInarney described “pilots” (payments in lieu of taxes transferred from the city’s enterprise funds such as water and wastewater) as another revenue source the city reduced in 2024 to cover Port Quincy utility bond debt service; he said that reduction was intentionally used to limit utility rate increases but lowered general-fund inflows. He added the city still owns the Topeka Hotel and is accounting for possible costs tied to that ownership in projections.

Options McInarney presented to close the gap included: targeted department reductions (an illustrative 13 percent cut across general-fund operating departments in a sample package), delaying or reducing capital improvement program (CIP) projects to shift mill-levy capacity from debt service to operations, increasing pilot transfers (he suggested a possible $500,000 increase as an option to study), delaying vehicle purchases (roughly $500,000 potential savings), a hiring freeze implemented case-by-case by the city manager, and placing up to six separate sales-tax questions on the ballot so voters could choose which programs to fund.

Several council members pushed for more detail before committing to a ballot measure or large cuts. Councilwoman Hoefer asked whether a hiring freeze would allow backfills for expected retirements; McInarney said the freeze would be exercised at the city manager’s discretion and considered case by case. Councilman Duncan warned that deep departmental cuts would reduce city services: “If we start cutting too much, we're gonna start hurting our own employees, our own productivity, our own progress we've made,” he said.

Staff reported that the city has engaged a professional polling consultant under a roughly $17,000 contract to survey about 500 residents, with a target two-week turnaround. Braxton, a city staff member leading the polling contract, said, “They're going to pull 500, 500 people. They feel that the margin of error is fairly low, lower than approximately 4%,” and that the poll script contains about 25 questions designed to test support for the menu of potential sales-tax options. McInarney said staff will return polling results to the governing body and hold one-on-one meetings with council members to refine priorities.

Council members also raised legal and logistical limits. Staff reminded the governing body that Kansas law restricts special-election timing: an April ballot for a sales-tax question requires early-February action to meet county and state lead-time requirements (staff cited a 75-day minimum lead time, with the secretary of state recommending 90 days). Staff also said a successful April approval would allow the city to capture revenue for most of calendar 2026; first receipts would likely arrive later in the year (staff estimated first collections arriving after the first calendar quarter following the election).

What was not decided: the governing body took no formal votes on any of the options during the special meeting. McInarney said staff will bring back two draft budgets (with and without sales-tax revenue) and more granular cost-reduction proposals for council review; polling and additional council meetings were scheduled to inform a potential ballot decision.

Ending: Staff will deliver polling results and proposed budget scenarios in coming weeks, meet individually with council members to review department-level options and return to the governing body before the early-February deadline for an April special election if the council chooses that path.