City manager warns sales-tax shortfall; council told to expect spending freezes and deferred capital projects

City Manager Jared Atkinson told the council the city is forecasting a sales-tax shortfall in the current fiscal year and outlined a set of spending controls and capital deferrals the administration has enacted to limit the general-fund impact.

Atkinson said the fiscal-year sales-tax budget was $105.6 million; the city’s forecast for collections through year-end is about $100.8 million, a shortfall of roughly $4.8 million or about 4.6% of the budgeted total. "So on a budget of 105.6, we have a forecast of $100,000,000... So it's a shortfall of about $4,800,000," Atkinson told council during his presentation.

Atkinson reviewed the steps already taken in response: a freeze on open positions except for public-safety roles, limited exceptions for critical hires, suspensions of nonessential travel and training, holding back equipment and materials purchases where feasible, and not spending budgeted election costs that will not be incurred. He said the city had also reviewed potential health-insurance savings and would defer a list of cash-funded capital-improvement projects for re-evaluation if revenue recovers.

"If we have a favorable reversal, we will 1 at a time start restoring those capital projects," Atkinson said. He asked council to treat the deferrals as temporary, noting that projects would be reintroduced for council consideration if revenue improves.

Atkinson previewed assumptions for next year’s budget: starting-sales-tax assumptions for FY2026 at about $103.5 million and a projected sales-tax increase of about 2.7% for FY2026 if current conditions hold. He also reported that other non–sales-tax general-fund revenues were holding near budget and that interest income was performing well, with the general-fund interest gain possibly reaching about $3 million by year-end.

Council members pressed Atkinson on forecast methodology and the sensitivity of the shortfall to small month-to-month variances; Atkinson said the city uses a weighted historical-average model and can run alternate forecasts on request.

Public-comment speaker and former councilmember Sheila Patterson Harris urged council not to freeze neighborhood-planning program funds that had been previously allocated for neighborhoods in northern and eastern Lubbock, saying neighborhood associations had been waiting to use those funds. Patterson Harris identified herself as Chapman Hill neighborhood chair and asked council to “take a look at that and please support the idea of not having those projects taken away.”

Why this matters: sales tax is the largest single general-fund revenue source for the city; a shortfall affects staffing, maintenance, and capital projects. Atkinson’s presentation set the administration’s expected path for conservative budgeting and gave council an early warning of possible trade-offs during the FY2026 budget process.

Next steps: staff will continue implementing hiring and spending restrictions, return more detailed sensitivity analyses on the sales-tax forecast on request, and present budget guidance and any recommended restorations of deferred capital projects if revenues improve.