Lago Vista adopts 2025–26 budget, lowers property tax rate to $0.42 per $100 valuation

The Lago Vista City Council on a unanimous vote adopted the citybudget for fiscal year 2025to2026 and separately approved an ordinance setting the property tax rate at $0.42 per $100 valuation, a measure council members said will lower the typical homeownerbill by about $10 under the councilproposal.

The budget and tax-rate votes followed a public hearing and an extended council discussion about transfers from the utility fund to the general fund, the size and sustainability of city reserves, and multi-year capital improvement needs. Council members, finance staff and other city officials debated how much of the utility fund reserves should pay for capital projects, and how bond financing and outside grants could be used to reduce pressure on reserves.

The budget ordinance (No. 25-09-25-01) was moved and seconded from the dais and approved by roll call. Council members then approved an amended ordinance (No. 25-09-25-02) setting the tax rate at $0.42 per $100 valuation.

City staff said an accounting correction required increasing the planned transfer from the utility fund to the general fund from $1,000,000 to $1,600,000 to balance the budget. Council members noted that the city transferred $3,600,000 the previous year and discussed whether repeated large transfers from utility reserves are sustainable. "This amount that we're transferring this year, $1,600,000, is actually the lowest it's been for about three or four years," said Councilman Prince, who described why he believes the transfer is sustainable but urged caution on using reserves for large capital projects.

Councilwoman Owen and others pressed for clearer guardrails on reserves and for regular review. "We need to keep a close eye on this," Owen said, citing a model that showed reserve depletion under current capital plans unless changes are made. City staff said they have engaged bond counsel and consultants, and that they will consult the University of Texas to identify appropriate reserve levels.

Officials also discussed the city's capital improvement program (CIP). Council members said the city currently faces roughly $100 million in identified CIP needs (reduced from an earlier estimate of about $255 million), with about $60 million of those needs still lacking identified funding. City staff said cash on hand as of Aug. 31 was about $57 million.

The council also discussed notice language and tax-rate calculations. The published hearing notice included a table required by Texas law that the mayor read into the record; council members clarified that the tax-rate figure the council intended to adopt at the meeting was $0.42. City staff provided a clarified estimate that the tax bill for a median-value homestead (listed in the packet as $330,321) at the proposed 0.42 rate would be approximately $1,387.35, a reduction of roughly $10 from the current bill.

Council members and staff called for continued work on three fronts: (1) shift more eligible capital costs to bond funding where appropriate; (2) refine the chart of accounts and fund allocations so transfers are clearer; and (3) develop reserve policies that set minimum reserve targets and require action if reserves fall below those levels. One councilmember said the council expects ordinances within six months to set required minimum reserve levels.

Motions and votes

- Ordinance No. 25-09-25-01 (adopt 2025to2026 annual budget): motion by Mayor Pro Tem Durbin; second by Council member Song; roll-call vote recorded as unanimous in favor.

- Ordinance No. 25-09-25-02 (adopt tax rate of $0.42 per $100 valuation): motion by Mayor Pro Tem Durbin; second by Council member Som; roll-call vote recorded as unanimous in favor.

Why this matters

The budget and tax-rate decisions determine the city's revenue plan for operations and capital spending through Sept. 30, 2026. Council debate focused on how to pay for a multi-year CIP and on maintaining reserves that can cover debt obligations and one-time needs without forcing sudden tax or rate spikes.

What happens next

Staff will finalize the budget documents and return with any recommended budget amendments or bond-funding adjustments. Council members asked staff to continue work with bond counsel, financial advisers and UT Austin consultants to set formal reserve targets and to return with options for shifting eligible projects onto bond funding or securing grants.