Richardson staff previews FY 2026 budget, recommends pay adjustments and holds current tax rate for now

City staff presented the proposed fiscal year 2026 budget at a Richardson City Council workshop on Aug. 4, outlining revenue pressures from national trade and workforce trends and from state legislation, proposing a mix of pay adjustments, fee changes and capital projects while recommending the council keep the current property tax rate and call a public hearing.

The presentation, led by city staff member Don Magner, laid out what Magner described as “a revenue driven budget” and said the proposal balances projected FY 2026 general fund revenue of roughly $181.3 million with planned expenditures while preserving a 90.99-day fund balance.

City leaders said the budget matters because state bills and recent appraisal changes are already reducing local revenue and because national economic forces — tariffs, supply-chain disruption and workforce shortages — are weighing on the city’s largest employers and on sales and property tax projections. Magner told the council Richardson has about 70 international firms whose decisions can materially affect local revenues and that the city is increasingly focusing on workforce development in response.

Key proposals and assumptions

- Compensation: Staff proposed an overall 4.5% compensation adjustment for employees (a combination of step/market adjustments and a general increase, with some increases effective April 1). Magner said that many public-safety staff will receive larger step increases and that the 4.5% recommendation reflects a balance between steps and across-the-board adjustments. "This budget is a revenue driven budget," Magner said during the presentation.

- Public safety and staffing: The budget preserves planned investments in police and fire, including equipment (patrol vehicles, ballistic vests and ambulance replacements), wellness programs and hiring plans. The city highlighted recent retirements and resignations in police and fire and noted planned classes (a fire academy class in July and apprentice firefighter hiring). The council discussed competitive pay pressures from neighboring cities and other employers.

- Revenue pressures from state legislation and appraisal actions: Magner identified three legislative impacts for FY 2026: elimination of a franchise fee on streaming services (estimated roughly $260,000 impact in FY 2026 and a larger effect in FY 2027), a proposed homestead/business personal property (BPP) exemption item requiring voter approval (discussed as reducing revenue further in coming years), and a special-session bill proposal to lower the property tax cap from 3.5% to 2.5% (estimated as an additional roughly $750,000 hit next year if enacted). He also described appraisal roll adjustments and abatements — including a recent supplemental roll and an abatement issue involving a large commercial account — that together reduced certified levy amounts and required a supplemental roll for correction.

- Fees and program changes: Budget staff recommended market-aligned fee adjustments across multiple departments to help close gaps. Examples: building-permit increases, changes to athletic field rental fees (including lighted-field rates), higher swim lesson fees and modest increases in gymnastics and facility rental fees. Budget officer Bob Klimier said, "Budget here is truly a team sport," when introducing fee and expenditure detail. The fee changes are included in the revenue totals presented to the council.

- Interlocal and revenue-generating proposals: The presentation included a proposed contract to begin receiving arrestees from Addison Police Department at Richardson's detention center starting Aug. 1; staff estimated about $500,000 to $600,000 in first-year revenue under the contract and said the agreement includes a 180-day cancellation clause. The council also heard a preview of a Plano-led $51 million bond for a new regional police training facility; Richardson’s 30% share could translate into roughly $15 million of principal in future debt and about $1.3 million in annual debt service to Richardson when bonds are issued.

- Capital and projects: The proposed FY 2026 capital plan maintains transfers to streets, parks and facilities at FY 2025 levels, and funds targeted projects including Polk Street reconstruction, a $1.8 million renovation of Heights Aquatic Center, roughly $20 million in water/wastewater maintenance projects and continued infrastructure maintenance. Staff said construction inflation and tariffs are increasing capital costs and delaying projects.

Council discussion and options

Council members asked for more detail on pay-plan options, including the fiscal impact of adding one percentage point to the proposed pay plan and how competitor cities’ actions could affect long-term rankings. Staff agreed to return tomorrow with additional scenarios showing the budget and tax-rate implications of alternative compensation actions. Several council members emphasized the importance of maintaining public-safety competitiveness and of communicating trade-offs to residents.

Tax rate and next steps

Staff recommended keeping the current tax rate (the rate presented to the council for FY 2026) and recommended calling a public hearing on Sept. 8 on the proposed tax rate and budget as required by state law. Magner noted the council could call the hearing using the current tax rate or call the hearing at the higher voter-approval rate to give the council more flexibility; he did not recommend adopting a higher rate at the workshop.

No formal council votes were taken during the Aug. 4 workshop. Staff told the council they will ask members to call a public hearing on the budget and tax rate at the next meeting and then file and present the full budget package in the coming weeks.

Ending

Staff will bring back requested scenarios and supporting detail at the reconvened workshop and follow-up sessions. The council recessed the Aug. 4 workshop until Aug. 5 for further review and potential action on the FY 2026 budget.