Caldwell workshop debates property‑tax constraints, fund‑balance uses and ballot options as city finalizes FY26 budget

Raelynn, a member of the city's finance staff, told the council at a budget workshop that House Bill 389 materially changed how Caldwell can grow property‑tax revenue and that the law's mechanics have a compounding effect on the city's long‑term levy capacity.

"House Bill 389 did a lot of things to change how property tax was calculated," Raelynn said in the workshop, explaining the bill affected the preliminary levy rate, new‑construction recognition and imposed an 8% cap that limits the city's ability to increase tax revenue from growth.

Why it matters: Council members were presented with a projected preliminary property‑tax budget and options to address a revenue gap in public safety budgets. Staff described a roughly $1.6 million combined operating shortfall across police and fire (police about $1.0 million, fire about $600,000) for the coming fiscal year and explained short‑term and longer‑term tools the council could consider to close gaps.

Key numbers and constraints

Finance staff presented preliminary numbers and the allocations staff planned to make among departments. Staff said the city's preliminary levy base for FY26 was about $31.5 million (total levy capacity shown in the worksheet) with components including a property‑tax replacement payment (~$254,000) and an urban‑renewal related adjustment discussed as roughly $442,000 in staff materials.

Options staff outlined

Raelynn and other staff walked council through a menu of options: - A one‑time property‑tax rebate (proposal examples in the discussion targeted seniors) using excess FY25 fund balance (council talked about roughly $750,000 set aside for a rebate); staff noted that would reduce fund balance and is not an ongoing revenue fix. - Spending excess fund balance on capital: staff proposed creating a city building/capital fund (staff mentioned a potential $3.0 million target) to set money aside for large building needs such as a future library, senior center, police facility repairs, or an airport tower commitment; transfers to capital funds are generally treated as one‑time commitments and are not typically reversed. - Levy options: staff summarized three levy tools — a temporary levy (simple majority, up to two years), a 0.004 levy rate override (requires 60% voter approval), and an ongoing levy override for a specific dollar amount (requires supermajority). Staff estimated taking a full 1% of foregone would add about $317,007 to the budget if the council chose that route and followed public‑notice requirements. - Fee and administrative changes: staff proposed creating or adjusting administrative fees and examining payment‑in‑lieu‑of‑tax (PILOT) arrangements with tax‑exempt entities as longer‑term revenue possibilities. Staff said some fee changes could take until October to implement and require administrative work.

Council discussion and tradeoffs

Councilors asked whether one‑time fund uses should be spent now or held in reserve. Some council members favored preserving excess fund balance to cover future capital needs and uncertainties; others supported targeted one‑time uses. Council debate repeatedly noted the risk of relying on building permits and sales tax forecasts to balance ongoing operating expenses.

Council members also discussed putting a voter question on the November ballot to gauge public support for an ongoing levy override for police and fire, noting the ballot filing deadline is in August; staff recommended further work on question language with the city attorney before a formal decision.

What was decided and next steps

No final fiscal policy decision was made at the workshop. Staff said they will refine numbers, update allocations as final property‑tax figures and rural contract amounts arrive, and bring back recommended ordinance language and draft ballot questions for council consideration prior to August deadlines. Staff also advised caution about using one‑time fund balance for ongoing operating costs and suggested prioritizing capital and short‑term fixes while developing longer‑term revenue strategies.

Ending

Council members closed the workshop by asking staff for: (1) a prioritized list of discretionary capital and operating items that could be delayed; (2) refined revenue estimates and fee‑implementation cost analysis; (3) draft ballot‑question language for levy options. Staff indicated they would return with those materials ahead of the public hearing and final budget adoption.