Finance staff warns of declining fund balance; suggests bond study and revenue options

City finance staff (identified in the meeting as Nina) presented the council with a seven‑year financial strategy update, describing operations, capital needs and possible revenue options to address a projected decline in the general fund.

Nina said the city's general fund is roughly $22.5 million and that under current revenue and spending trends the fund balance projection would ‘‘go on a real steep downhill,’’ leaving the city to draw down reserves to meet ongoing expenses. She noted the city began the FY25‑26 budget process facing an approximate $2 million gap before other planned additions. "If we do nothing different than what we're doing today, we would see a pretty big dip in our fund balance," she said.

The staff analysis identified operational and capital shortfalls. Department heads flagged staffing needs that would total about $2.8 million over seven years (cumulative new‑hire costs, not an annual figure). Equipment needs were estimated at roughly $9 million over seven years. Staff's preliminary capital estimate for the same period was approximately $50 million, excluding the Big Creek dam replacement project; that $50 million figure assumes some grant funding and remains subject to refinement as officials complete a water master plan and a stormwater master plan.

Nina summarized potential revenue levers and timing. She said the South Beach urban renewal area is scheduled to expire in fiscal year 2027–28 and will return about $1.5 million annually to the general fund at that point. She also described a League of Oregon Cities proposal that would change the allowable share of transient lodging tax (TLT) to the general fund; if approved at the state level it could yield roughly $500,000–$600,000 for Newport. Other local options identified by staff include local option levies, general obligation bonds, local improvement districts and fee adjustments. Staff said they will update the system development charge (SDC) methodology and explore deferring SDCs until occupancy for some multifamily projects to improve project cash flow.

On next steps, staff recommended additional analysis and stakeholder engagement. Among the recommendations was to scope and study a potential general obligation bond for 2026 focused on urgent infrastructure needs; staff stressed the bond recommendation would exclude the dam, which is being analyzed separately in a financial feasibility study expected in the next two months. Nina said staff would present bond scoping and a 10‑year capital improvement program to council this fall if the council gives staff direction to continue.

Councillors raised questions about campaign outreach and public communications, the difficulty of winning bond measures in the current economy, and whether prior operational changes (for example, four‑day city hall schedules) had delivered measurable savings. Councilors emphasized the need for clear, simple messaging that ties revenue requests to visible local projects — "fix our potholes"‑style framing — and for concrete talking points council members can use when discussing potential measures with constituents.

Staff also noted internal efficiency work the city is pursuing, including recreation program revenue improvements, franchise fee reviews and technology investments to reduce operating costs. The council gave general support for staff to continue work on the strategy and asked for more detailed, voter‑facing materials and a scoped approach to potential bond options.