Canby council directs staff to deliver budget meeting 20% reserve target amid debate over cuts and timeline

The Canby City Council on May 21 directed the city administrator to prepare a proposed FY 2025–26 budget that meets a minimum 20% unrestricted general-fund reserve, after extended debate about whether to accept a staff proposal that would lower the reserve to 15% to avoid layoffs.

Councilors and city finance staff spent more than an hour arguing the trade-offs between trimming reserves to preserve staff and maintaining higher contingency to protect city services if revenues fall. City Administrator Eileen said the leadership team "unanimously agreed to recommend strategic cuts and to avoid reductions in force," and asked the council to set the reserve level so staff could return with targeted budget changes.

Why it matters: The council’s decision determines whether staff must generate roughly $678,000 in additional cuts to meet a 20% reserve target that councilors and the budget officer said would align with the Government Finance Officers Association (GFOA) guidance. That number and the choice to tap reserves shaped later votes and follow-up deadlines the council set for the budget committee.

Most important facts

- Staff presentation: City Administrator Eileen told council that leadership had proposed reducing the general-fund strategic reserve to 15% for the coming year so the city could avoid layoffs, describing the year as a "bridge year" because the city expects roughly $1,000,000 per year in additional revenue beginning FY 2026–27 when an urban renewal area sunsets. Finance Director Scott Schlage explained how operating revenues and ending fund balance interact with the reserve calculation.

- Council direction: By consensus the council directed staff to produce a budget that meets a 20% unrestricted general-fund reserve and to return with a formal resolution memorializing the policy at a future meeting. Council members explicitly asked department directors to prepare cuts; staff said departments were already preparing reductions focused on materials and services rather than layoffs.

- Size of the shortfall: Staff and council discussed a roughly $678,000 difference between the proposed budget and a 20% reserve target; the city provided email guidance to the council in the weeks before the budget committee that calculating the larger reserve would require additional cuts if COLA or labor agreements did not come in lower than assumed.

- Process and timing: Councilors and the city administrator agreed that department directors would present their proposed cuts at upcoming budget committee meetings (the second budget committee meeting was scheduled for May 22 and a subsequent meeting for May 29). Council also asked staff to return with a resolution so the change in policy would be recorded formally.

Points of disagreement and context

Councilors split on whether dipping into reserves now was prudent. Several members, including Councilor Davis and Council President Hensley, urged retaining a higher reserve (the council discussed an earlier 2018 resolution that set a 30–40% target and subsequent internal policy language indicating a 20–25% operational target). Councilor Padden said he would accept a 20–25% policy but pressed for even distribution of cuts across departments; Councilor Waterman supported a 15% interim level if it avoids layoffs but also said the council must work immediately to identify new revenue sources.

Budget committee member David Tate urged adoption of the GFOA guideline (two months of operating expenses) and asked the council to explain what taxpayers would receive from holding dollars above that guidance. Several councilors requested a multi-year replenishment plan showing how reserves would be rebuilt to target levels over time.

Council expectations for staff

Councilors asked the administrator and finance staff to: - Return the next day to the budget committee with department-level cuts that meet the council’s direction (staff reported directors had been asked to identify reductions of about 12% in general-fund budgets to reach the 20% reserve target). - Bring a proposed resolution to memorialize the council’s reserve policy. - Provide a multi-year plan or options to replenish the reserve (revenue options, service-priority recommendations and timing).

Ending

Council members agreed there is no simple answer and asked staff to come back with concrete options. The council set an expectation that department directors would show how cuts would work in practice at the scheduled budget committee meetings and that the council would discuss revenue alternatives and service priorities in follow-up sessions.