McKinney officials unveil $232.1 million FY2026 general fund budget; consultants recommend modest water and wastewater increases

McKinney — City staff on Aug. 8 presented a proposed fiscal year 2026 budget that would set the general fund at about $232.1 million and an all-funds program near $942 million, while recommending water and wastewater rate adjustments to cover rising wholesale costs and planned debt service.

The budget managers said the proposed property tax rate would fall modestly to 0.412284 per $100 of valuation — a 0.3-cent cut from the current rate — and they described the rate as 2.88% above the state "no new revenue" calculation used in Texas property-tax notices. The City Manager, Paul Grimes, said the document "identifies the resources needed during the next fiscal year to ensure that we can successfully carry out the strategic priorities set forth by the Council."

Why it matters: the plan funds added staff and equipment for public safety, utilities and the airport while preserving investments in streets, parks and affordable housing. It also proposes a multiyear approach to utility rates because roughly 60–75% of McKinney's water and wastewater cost of service is a pass-through charge from the North Texas Municipal Water District (NTMWD); when the district raises rates, the city must pass most of that cost to customers.

Key budget figures and priorities - General Fund proposed: $232,100,000. All-funds budget (enterprise, CIP, insurance, etc.): nearly $942,000,000. - Proposed property-tax rate: 0.412284 (presented as 0.412 in slides); council staff said the proposed rate is 2.88% above the "no new revenue" figure used for truth-in-taxation calculations. - Staffing: the proposed budget includes roughly 59 new full-time equivalents across all funds, of which staff identified 10 new positions in public safety (police and fire); staff said some of the new positions are funded from non‑general-fund sources (water, airport, etc.). - Capital and infrastructure: the city continues work on the 2019 and 2024 bond programs ($350 million and $450 million, respectively); staff expect further bond sales in FY2026 and continued CIP spending on roads, utilities and the airport terminal.

Water and wastewater rates: consultant recommendations and bill impacts Willdan Financial Services, the city's rate consultant, recommended an adjustment that Willdan presented as about a 4% increase to retail water rates and about a 4.5% increase to wastewater rates effective October 2025, with larger adjustments projected in later years if NTMWD implements the double-digit increases its forecasts show for 2027–28.

Dan Jackson, vice president of Willdan, framed the long-term constraint bluntly: "Water is a product. And so as the cost of producing that product goes up, you have no choice but to pass it through to your ultimate rate payers." Jackson told council members that 60–65% of McKinney's utility cost of service is simply the NTMWD pass-through charge and that NTMWD's current forecast shows an 8.8% wholesale water increase for 2026 and higher increases in the next two years.

Jackson and staff presented customer-impact examples: the average residential household (about 8,000–10,000 gallons monthly) currently pays about $136.30 for combined water and sewer under today's rates. Under the recommended FY2026 adjustments, most typical residential customers would see bills rise by about $4–$6 per month; staff cautioned that rates in later years could be higher if wholesale increases materialize.

Utility operations and risk City staff highlighted operational improvements that reduced non‑revenue water (water loss) from about 24% a decade ago to roughly 7–8% today; the presentation credited meter work, a service‑line replacement program and other efforts for that reduction. Staff also said the city expects to issue roughly $253 million of long‑term debt over the next several years to fund water and wastewater system improvements, and that debt service is a significant driver of future rate needs.

Airport, revenues and staffing The FY2026 proposal includes airport staffing and marketing ahead of planned passenger service at McKinney National Airport. Staff said they expect several years of operating losses associated with starting commercial service and proposed temporarily reducing the annual transfer from airport operating revenues to the construction fund to cover near‑term operating costs. The budget schedules nine new airport positions in the year preceding terminal operations, including terminal dispatch and operations staff.

Other program highlights - Public safety: 5 new police positions (including an NIBRS specialist and a detective/sergeant addition) and 5 new fire positions (four firefighters and one battalion chief) tied to new or rebuilt stations. - Streets: staff described a multiyear increase in reconstruction spending. The city set a target of roughly $20 million per year for reconstruction work; staff said that level arrests decline but does not immediately restore pavement-condition indices and that a new PCI (pavement condition index) assessment is underway for late 2025. - Affordable housing: the proposed budget allocates roughly $3.6 million in housing resources across multiple funds and programs, including Community Development Block Grant funding, Community Housing Fund dollars and continuing support for a Community Land Trust effort; staff said the department will continue programmatic work on rental assistance, housing rehabilitation and a housing summit. - Grants and community support: staff recommended folding the existing Volunteer McKinney $75,000 line item into the city’s Community Support Grants program so that recipients must submit a grant application and reporting consistent with other grantees; council indicated support for that change.

Decisions, directions and next steps - Staff presented the proposed budget and rate plan; council set a public hearing on the tax rate and budget for Sept. 2, 2025, and staff indicated budget adoption will occur at that hearing unless council directs otherwise. - Staff said they will exclude the lease appropriation for 10 North Tennessee from the FY2026 budget (the lease remains cancellable under its terms if not budgeted). - Staff will return with detailed rate ordinances and fee schedules for adoption along the normal budget timetable; staff also planned follow-up materials on staffing requests, PCI results when available and a more detailed airport operating projection as terminal construction nears completion.

Quotes "The budget identifies the resources needed during the next fiscal year to ensure that we can successfully carry out the strategic priorities set forth by the Council," City Manager Paul Grimes said during his opening remarks. "Water is a product. And so as the cost of producing that product goes up, you have no choice but to pass it through to your ultimate rate payers," Dan Jackson of Willdan said while explaining the consultant's recommendation.

What's next Council will accept public input at a scheduled Aug. 19 citizen meeting and will hold a budget and tax‑rate public hearing and adoption on Sept. 2, 2025. Staff said they will supply additional detail on staffing requests, the packet of proposed rate ordinances and the PCI update when the pavement condition assessment is complete.