Council hears budget workshop: $6 million general-fund shortfall, $165M in CIP activity and proposed financial-policy package

City staff presented the city's third pre-budget workshop on July 1, summarizing preliminary revenue and expenditure estimates for fiscal year 2025-26, a portfolio of capital projects under design and construction, and a proposed set of financial-policy resolutions intended to improve discipline and transparency in future budgets.

Key budget figures and near-term picture: - Staff presented preliminary general-fund revenues around $282.5 million and proposed expenditures near $288.6 million, producing a preliminary shortfall of roughly $6 million. Staff said that figure will be refined as final appraisal values, fee studies and departmental revenue updates are received. - Staff reported the city's estimated new revenue at about 3.4% and noted that last year's general-fund increase was higher; bridge (toll) revenue experienced a recent dip tied to tariff/behavioral changes and contributed to pressure on the revenue side. - Budget staff asked council to expect further adjustments as property appraisals finalize July 25 and as staff refines fee studies (tolls, utilities) and revenue-line-item reviews (licenses, rents, fines and forfeitures).

Capital program and projects: - Staff provided a packet of projects and contracts: about $29.6 million in projects under design, $96 million under construction, and roughly $39 million completed in the last three years, for a combined pipeline near $165 million. - Notable unfunded or partially funded projects listed in the packet included Boulevard of the Americas, a pedestrian bridge at Father M. G. (Magna) Bowl, Fire Station 16 (Buena Vista), a south-sector police substation (staff cited a $6.8 million funding gap), artificial-turf work at Max Mandel and other park and road improvements. - Staff said some projects are funded through borrowing and others from pay-as-you-go or enterprise transfers; they recommended several funding and policy changes to create more predictable district-level funding and equitable distribution across council districts.

Proposed policy resolutions and operational changes: Staff proposed five broad policy resolutions to pair with the FY2025-26 budget: 1) District CIP allocation policy: propose setting a percentage (staff suggested 3% of bond issues as a starting metric) of bond proceeds to be set aside for district-level projects, producing an approximate allocation of $200,000 per council district under the current bond-sizing example. Staff said a formal policy would increase consistency and transparency on neighborhood-scale improvements. 2) Council district support funds (travel, promotion, community support): an annual allocation template for council travel, outreach and community event support (staff suggested amounts comparable to existing practice, with formal reporting requirements and permitted uses to avoid ad-hoc waivers). 3) Cost-recovery / user-fee policy: standardize how program fees are set so the city recovers appropriate costs for services and reduces hidden subsidies in enterprise and general funds. 4) Debt-management policy: formal limits and metrics to align borrowing with affordability and protect reserves; staff noted that moving two cents of the M&O share to I&S (insfrastructure debt service) could fund more capital within the same total rate while maintaining current tax-rate neutrality. 5) Fund-balance policy and grant-management policy: clearer minimum reserve targets (staff discussed 15% minimum as a floor while noting rating-agency comparisons suggest a higher target for long-term stability) and rules for evaluating grants, including an expectation to model long-term costs before accepting multi-year grant-funded programs.

Next steps and schedule: - Staff will publish the budget packet and proposed CIP notices July 29 and proceed with public hearings; final appraisals were expected July 25. - Budget workshops on department-specific items were scheduled for August 14 and 15; staff asked the council to indicate additional departments they wanted to review in August.

Why it matters: The workshop laid out a structurally balanced-budget target but showed a near-term gap that staff must close through revenue adjustments, expenditure reductions or one-time fund use. Staff emphasized the need for new financial policies to make budgeting more consistent, protect reserves, and create a predictable path for neighborhood-level capital investment.

Speakers and sources: Budget presentation led by Susa Parsons (budget department) and Assistant City Manager Ramon Chavez; Noe Hinojosa and other finance staff answered debt- and bridge-revenue questions. Council asked for additional detail on specific revenue line items and a break-out of 'other financing sources.

Ending: Staff will provide updated figures following final appraisals and will return with draft resolutions and a refined CIP/bond package for the August budget workshops and the July 29 proposed-budget publication timeline.