Waco projects $32.1 million in budget efficiencies as city plans conservative FY26 amid state, federal risks

City finance officials told the Waco City Council on May 6 that year‑to‑date results through March 31 show most major funds tracking near expectations but that the city will adopt a conservative approach to fiscal 2026 amid state and federal headwinds.

"We are in year 2 of a 4 year journey, of fiscal constraint," Assistant City Manager Blue Khoslet said during the work session, framing the administration’s plan for continued spending restraint. Colin Booth, director of finance, said general fund revenues were about 73% of the annual budget through March and noted several line‑item variances: property taxes were at 98% of budget, franchise fees at about 42% and intergovernmental (grant) revenues at roughly 77%.

The presentation centered on a department‑led efficiency exercise intended to reduce recurring costs. Booth and Khoslet told councilors the city set a target of $24 million in efficiencies and departments identified $32.1 million in potential savings. Of that total, the general fund identified roughly $12.4 million (about $11.7 million recurring) and non‑general funds identified $19.8 million (about $15.4 million recurring).

Why it matters: city staff said the savings will help preserve essential services while the council and manager build the FY26 budget. Officials warned that state and federal legislative actions could reduce city revenue and that some one‑time cash balances will require a careful drawdown plan.

Key details from the presentation: - Preliminary net taxable value for FY2026 was reported at about $18.15 billion, up from the certified roll of roughly $16.3 billion, a change staff described as an approximately 11.5% increase in preliminary values. Staff cautioned that taxable values typically fall between preliminary and certified rolls as protests and exemptions are processed. - Sales tax revenue remains positive year‑to‑date (staff reported a comparable fiscal‑year‑to‑date increase of about 7.1%) but showed signs of slowing; staff said retail comprises about 47–48% of local sales tax collections and that prudence is warranted for budgeting. - Staff reported available cash reserves and working capital that could be used for one‑time capital projects but urged a planned approach rather than drawing balances down immediately.

Staff also flagged specific potential revenue impacts from legislation under consideration in Austin and at the federal level. Booth and the city manager cited an estimated $1.7 million annual loss to Waco from a proposed business personal property exemption (House Bill 9 / companion resolution) and noted a separate bill exempting streaming services from a telecom right‑of‑way fee could cost the city about $1.3 million a year if enacted.

Council discussion and next steps: council members thanked staff for the department‑driven efficiency effort and asked staff to provide more granular job‑ and industry‑level economic tracking in partnership with Prosper Waco and economic development staff. City staff scheduled additional budget briefings and a June 6 budget retreat; the council will consider adopting the maximum tax rate in early August and hold public hearings on the budget and tax rate in September under the planned schedule presented.

Booth emphasized that many of the efficiency items were recurring savings that would reset the structural base of the budget: "That total impact... $12,400,000, 11.6 million of that being the recurring," he said. The council directed staff to continue refining assumptions and to return with the FY26 proposed budget in coming months.

Ending: The city manager and finance team said they will update councilors regularly as state and federal legislative outcomes and the appraisal roll certification process crystallize. The next in‑depth budget work session and retreat are scheduled for June 6 at the BRIC.