Kearney City manager outlines budget timeline, state changes and rising costs

Brenda Jensen, Kearney City manager, told the City Council on the city budget process, the new state rules that limit property-tax growth and a series of one-time and recurring cost pressures that will affect fiscal-year 2026 budgeting.

Jensen said the new state property-tax formula passed in 2024 under LB647 (and related session bills) replaces an earlier “lid on restricted funds” and allows a local government “slice” increase of 5.17 percent this year plus growth. She also warned that the state auditor has not yet released final forms showing how the state will implement the statute, so the city will not have definitive reporting guidance until roughly June.

The state’s Nebraska Advantage economic development program will cut into local option sales-tax revenue next year, Jensen said; the city has received notice it should expect a roughly $230,000 reduction in local-option sales-tax revenue next year.

Jensen said the city’s general fund remains under pressure from personnel costs, pensions and property-and-casualty insurance increases. She cited two recent state-mandated retirement increases — a police pension match increase that will raise the city’s cost for law-enforcement retirement contributions and a continued phase-in of firefighter pension increases — and she estimated those two changes, combined with Nebraska Advantage reductions, add roughly $390,000 to next year’s costs.

Why it matters: these changes affect how much the city must plan to collect and where it can direct limited general-fund dollars. Jensen emphasized that taxes, sales taxes and a recurring NPPD lease payment are the largest pieces of Kearney’s general-fund revenue mix and that rising personnel and insurance costs consume the largest share of general-fund spending.

Details and context

Timeline and process: Jensen reviewed the administration’s schedule: internal work begins each January, council members first see special-sales-tax details in March, the city holds a joint city–county budget meeting in July and the formal public hearings and levy-setting happen in September before an October 1 fiscal-year start.

Revenue mix: Jensen said the general fund is driven primarily by tax receipts: about $5 million in property tax, about $11.9 million from the 1% general sales-tax allocation to operations, and roughly $6.6 million net from an NPPD lease payment after rebates. She noted some occupation taxes and other pass-through taxes are rebated to debt service or other entities and therefore not available for general operations.

State law and implementation risk: Jensen named LB647 (the post‑session enactment implementing the property-tax cap) and noted the city will be able to capture the state “slice” (5.17%) plus measured growth. She cautioned: “The state auditor has not come out with the form of how they’re actually going to implement the state statute. So we won't get it until about June.” That uncertainty affects how detailed the city can be in budget projections.

Mandated or recurring cost increases: Jensen listed several recurring pressures: - Nebraska Advantage program reimbursements (city-received notice for roughly $230,000 in local-option sales-tax reductions next year). - Highway 30 maintenance/reconstruction obligations: the city is responsible for a share of state highway work inside city limits (she cited 50% for maintenance, 20% for reconstruction and about 10% for safety projects in the state’s characterization) and said an upcoming East Highway 30 lighting project will cost the city about $293,000 next year; a larger FY27 reconstruction was presented by the state as a $20 million project with a city share in the neighborhood of $4 million (about 20%). - Retirement/pension increases: Jensen said the state recently raised the mandated match for law-enforcement retirement and has phased firefighter pension increases; she estimated combined incremental pension costs on the order of tens of thousands of dollars and cited roughly $24,000 for law enforcement and about $35,000 for firefighters in additional annual cost (aggregated with other changes to about $390,000 in added costs for next year). - Property-and-casualty insurance: the city’s property-and-casualty premium cost has risen markedly over five years; Jensen reported a roughly 135% increase in that coverage line and projected another $200,000–$250,000 increase next year as insurers revalue assets and add facilities.

Operating and capital: Jensen noted that while the city’s combined budget exceeds $100 million when enterprise and capital funds are included, the most politically and operationally visible constraints are in the general fund. She said enterprise funds (utilities, airport, landfill) primarily use user fees and that capital-project funds include the large special‑sales‑tax–funded projects such as the SportsPlex.

On new city services and budget impacts: Jensen described several services and facilities added over the past five years (indoor tennis center, Yanney Gardens, SportsPlex) and said these additions increase operating demands and staffing needs. She said the SportsPlex operating budget for a full year is estimated at about $1.6 million; this specific facility and similar new services factor into near-term general-fund pressure because operating subsidies have been required while revenues ramp up.

What the council asked and next steps

Council members and staff discussed timing for levy-setting (September), the influence of state forms and the need for staff to return with more refined numbers once the state auditor publishes implementation guidance and valuation updates. Jensen asked council members to raise questions as staff refines the draft budget and to prepare for more detailed discussions at the budget retreat in May and the July joint meeting.

Ending

Jensen asked the council to treat the presentation as an initial overview and said staff will return with project-level costs, updated revenue estimates after state guidance arrives and specific funding proposals for large capital items. “We won't get [the state auditor form] until about June,” she said, underscoring the need for iterative budget work as state guidance and local valuation data arrive.