Quarter 2 financial report: city reports sales-tax growth, rising utility revenues and proposed CIP with tax-supported borrowing capacity

Myra Cantu, the city budget manager, presented the city's second-quarter financial report covering the general fund, electric fund and water fund and summarized an updated tax-supported capital improvement and debt model for fiscal 2026 and beyond.

Cantu said general-fund revenue through the roll-forward budget totaled about $110.9 million, driven by sales tax and property tax. Sales tax was reported up about 10.5% compared with the same period in FY 2024; property-tax collections were reported at roughly 92% of billed amounts and up 2.5% year over year. Cantu noted planning-and-development revenue has tapered and fire/EMS revenue rose about 12.5% year over year due to increased calls for service.

In enterprise funds, the electric fund's operating revenues were about 41.2% of budget through the second quarter; net purchased power was up compared with the prior year and purchase-power costs represented a substantial line item in the electric budget. The water fund showed strong impact-fee receipts year to date; Cantu said impact fees were roughly $7 million above last year at about 81% of plan for the budget period. Water charges were up materially (Cantu cited a 50% increase versus the same quarter in 2024) due to customer growth and rate changes.

Cantu and finance staff presented a draft tax-supported CIP and debt model for FY 2026 that assumed continued assessed-value growth in the near term, a 50/50 split of frozen revenue between O&M and interest-and-sinking (I&S) in the model, and modest assessed-value growth thereafter. Under those assumptions the model shows capacity to issue approximately $247.3 million in debt over the next five years; after accounting for projects already programmed, staff said approximately $34.2 million of additional capacity remains under the current modeled tax rate (preliminary total tax-rate estimate ~0.36). The draft FY2026 tax-supported CIP items presented included, among others, Fire Station 8 design, Leander Road work, a customer-service center and a proposed customer-service center general-obligation item.

Council members asked for clarification on several items that will affect the final budget and potential debt planning: the composition of assessor/valuation growth assumptions (staff said the model uses city estimates and historical growth, and that WCAD provides the certified roll on July 25), the accounting treatment of capitalized labor and non-operating expense timing, the proposed sidewalk and intersection funding levels, and whether the city should plan for a potential election to increase the operational tax rate to cover recurring costs associated with new facilities (for instance staffing a new fire station). Staff said they will return with refined bond/tax-rate scenarios, cost estimates and options for voter-authorized rate changes if council wishes to pursue an election timeline.