City manager outlines proposed FY2026 budget, half‑penny tax shift and spending priorities

The City Manager presented the City of Lubbock’s proposed fiscal year 2026 budget in a council work session, describing it as balanced and compliant with state law and the city charter. The presentation included a proposed tax‑rate shift that moves a half‑penny from the interest and sinking (I&S) component to the maintenance and operations (M&O) component, projected changes in sales tax and new property values, proposed compensation adjustments, and a package of capital projects and vehicle purchases. No formal action was taken at the session; the first formal step in the statutory tax process will be the Aug. 12 meeting to propose the maximum tax rate.

Why it matters: the budget sets spending and revenue priorities for city services, public safety pay and staffing, street and utility projects, and user fees that affect households and businesses across Lubbock. Changes in sales tax, new construction values and debt service shape how much the city can fund operations without drawing reserves.

Revenue outlook and the tax‑rate shift The presentation showed a multi‑year decline in the value of new taxable property — from about $796 million in fiscal year 2024 (producing roughly $3.8 million) to an estimated $408 million for the budget under discussion (producing about $1.52 million). The city also budgeted sales tax at $103,000,000 for FY2026, down from the prior year’s budgeted $105,600,000.

To address revenue pressures, the City Manager proposed moving a half‑penny from the I&S rate into M&O. He summarized the proposal using the figures presented: the current M&O rate of 35.7456 pennies and I&S of 11.2664 pennies (total 47.012 pennies) would change under the proposed budget to M&O 37.1779 and I&S 10.7586 (total 47.9365 pennies). On that shift he said, “It is no change to a taxpayer’s bill. Yet, by law, that is a tax increase.”

City staff told council the revenue difference created by the half‑penny (roughly $1.2 million) would be met with unusually strong interest earnings in the I&S fund this year and next; the manager said those interest earnings and in‑hand balances cover the proposed shift in the five‑year model the city used for planning.

Compensation, staffing and benefits The proposed budget includes $5,789,000 in compensation adjustments across funds. Staff described a 2.5 percent cost‑of‑living adjustment (COLA) for non‑civil‑service employees and step increases for civil‑service positions. The presentation said the police and fire departments receive adjustments roughly equivalent to 4 percent for fiscal planning purposes, but that formal bargaining (Meet and Confer) remains suspended for the fire association and negotiations with police on non‑monetary recruiting/retention items continue.

Staffing changes in the general fund include 13 positions proposed for elimination and two proposed additions (two animal control officers). The city will also carry nine full‑time equivalent positions for the West Texas Veterans Cemetery on its books; those positions are funded 100 percent by a contract with the Texas Veterans Land Board, the presentation said.

Fees, user charges and other operating changes The proposal includes a $1 monthly increase for the residential solid waste customer charge and a $1‑per‑ton tipping fee for the landfill. Staff also proposed a set of departmental fee adjustments (for such items as building and fire inspections, health permits and certain reinspection fees) intended to better match costs to revenues. The City Manager noted fewer proposed fee increases this year overall than in prior years.

Capital program, vehicles and bonds The general fund capital program presented totaled about $78.5 million across 27 projects, with $27 million shown as bond‑funded projects. Street maintenance was budgeted at $14.5 million (approximately $14 million cash from general fund and $500,000 from Gateway). The presentation highlighted major bond projects, including Upland (80th/2nd to 90th/8th) estimated at $12.5 million and Broadway utility work slated for next summer. City‑wide vehicle purchases were listed at 139 vehicles, of which 122 are planned as cash purchases; tax notes would fund specific fire and solid‑waste vehicles.

Council and staff discussed using a contingency for 2022 bond projects. The City Manager recommended creating a contingency CIP funded from interest earnings in the I&S fund (he proposed a $2 million contingency using those earnings) to provide a safety valve while large contracts for bond projects begin construction; he contrasted that with the 2024 bond contingency of $10 million, which is financed with bond proceeds.

Reserves and debt Staff presented available reserve figures and projections. The work session packet showed an estimated FY2025 available general fund reserve of about $22.03 million and a projected year‑end available reserve for FY2026 of roughly $10.2 million under the proposed budget. Across all funds, staff projected available reserves falling from about $85.9 million in FY2025 to about $75.9 million in FY2026, largely due to planned uses in the general fund. The presentation also summarized city debt and noted that about 22 percent of total governmental debt is tax‑supported while the remainder is user‑fee supported (water, electric, etc.).

Other notable items - Health insurance: staff said the city’s health plan pricing change for the coming calendar year is smaller than expected — roughly a 3.5 percent increase — after negotiating with a new consultant, Elizabeth Lara. The City Manager noted employee‑only coverage costs about $11.22 per pay period in FY2025 and would rise by $0.39 under the proposal. - Solid waste: staff described steps to fund a transfer station and to replace aging equipment, and noted the department will request a small tipping fee increase to recover higher handling costs. - Parks mowing: the budget includes higher professional‑services costs for parks mowing under a new master contract; the manager said the city’s in‑house mowing capacity is limited and contracting was more cost‑effective given prior contractor failures. - ARPA and other grants: the packet summarized remaining ARPA commitments (about $5.768 million unspent) and the West Lubbock water expansion project (about $3.6 million in committed utility project funds).

What action the council took Council received the presentation; no formal budget votes were taken at the work session. The City Manager said the first formal action required by state process — proposing the maximum tax rate for publication and notice — will occur at the Aug. 12 council meeting. Staff were also asked to provide a more detailed breakdown of outstanding general fund debt by project/series for council review.

The city manager closed the session by thanking staff and noting more review and presentation will follow as council moves toward budget adoption and the statutory tax‑rate notice schedule.