San Marcos staff warn FY26 outlook requires cuts or higher tax rate; council asks for scenarios

San Marcos City Manager Stephanie Reyes and Finance Director John Locke told the City Council on May 20 that the city’s preliminary fiscal year 2026 general fund budget will be structurally unbalanced at the current tax rate unless the council approves either spending cuts or a higher rate.

Reyes said the city is facing “declining sales tax” and that property tax growth has slowed, and that those trends – combined with inflation – mean the city cannot maintain current programs and services without action. Finance Director John Locke told council the fiscal 2026 property tax revenue at the current rate is “estimated to decrease by $1,300,000,” and that sales-tax receipts have trailed prior years for more than a year.

Why it matters: sales and property taxes make up roughly two-thirds of general fund revenue. Staff presented four example paths: keep the current rate and make roughly $1.1 million in additional cuts; keep the current rate but make deeper cuts…