Boise City staff present FY2026 proposal, recommend 3% property tax increase and foregone recovery
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Summary
City staff told the Boise City Council at a budget workshop that a proposed FY2026 budget is balanced but must rely on a 3% property tax base increase, foregone recovery and use of reserves to address rising costs driven by pensions, software and insurance.
Boise City staff presented a proposed fiscal year 2026 budget at a council workshop that they described as balanced but constrained by rising costs and new state limits on growth. Staff recommended taking the maximum 3% base property tax increase, using foregone recovery and drawing on capital reserves to maintain services and invest in major repairs.
The recommendation was framed as an effort to "prioritize urgent needs while preserving and building future capacity," Eric, who led the budget overview, told the council. He said the budget aims to mitigate risk, invest in employees and address capital needs while preserving flexibility for future years.
Why it matters: Staff said cost growth — in particular PERSI retirement contributions, software subscriptions and insurance claims — is outpacing available revenue. At the same time, state changes to property tax treatment of growth will reduce typical new-construction revenue for the city, putting additional pressure on the general fund.
Key details - Property taxes: Staff recommended taking the full allowable 3% base increase in FY2026 and noted three ways property tax revenue changes year over year: (1) the 3% base increase, (2) new construction/annexation/urban renewal effects, and (3) foregone recovery. Eric said the budget assumes the 3% base increase in the 10-year forecast but that the council can revisit it annually. - House Bill 389 impacts: Courtney Washburn and Eric explained that changes in state law (House Bill 389) reduce new-construction revenue to 90% of taxable value and cap certain urban renewal receipts at 80%. Staff estimated the 90% cap on new construction reduces revenue about $1.7 million; the 80% limit on an expiring River Myrtle/Old Boise urban renewal district reduces base revenue by about $1.0 million. - Foregone recovery and transfers: Staff proposed using foregone recovery that would generate $1.9 million in base revenue; of that, approximately $1.6 million would be transferred to the capital fund to address major repairs and maintenance. Eric said the city must declare uses for foregone funds under state law. - Property tax rebate (circuit breaker): The budget includes $900,000 for the property tax rebate program in FY2026; staff estimated current-year payouts at about $736,000 with an average payment of roughly $500 and said actual FY2026 spending will depend on applications and eligibility. - VRT (Valley Regional Transit): Staff noted the city has a policy/MOU of allocating an amount equivalent to 5% of property taxes toward VRT; for FY2026 staff said VRT’s requested amount was less than 5% and that the foregone revenue assumption would allow returning toward the 5% level in outer years.
What staff stressed and what remains unresolved: Staff repeatedly emphasized the structural gap between rising costs and available revenues and recommended measured, incremental steps (3% property tax increase, targeted transfers to capital and use of foregone recovery). Several council members asked for additional detail on household impacts and the per-household value of tax changes; Eric said he did not have a per-household analysis on hand but would follow up. Staff also indicated further detail will be provided at the second budget workshop and in the budget book due in June.
Ending: Staff said the FY2026 proposal is intentionally conservative to preserve options; council members pressed staff for follow-up materials and historic trend data before decisions at the subsequent workshop and the public hearing schedule that staff outlined.