Partner Tulsa staff warn of FY26 shortfall; propose restricted reserves and capital plan

Partner Tulsa staff presented a five-year forecast and capital plan and urged trustees to endorse a policy change that would show restricted reserves on the balance sheet and create a plan to address deferred maintenance in parking garages and other assets.

Gary Hamer, director of strategic planning, led the presentation. He described the forecast as a base case that incorporates FY25 actuals and a placeholder personnel budget for FY26, and he said the staff included inflation assumptions and projected revenue reductions tied to parking and the city service agreement. Hamer told trustees the organization is projecting a near-term operating gap and recommended establishing a restricted cash account for capital reserves and a 10% operating reserve.

Hamer and staff outlined several specific items in the capital plan and forecast: - Debt: The organization has three remaining bond payments tied to previously refinanced debt, each about $650,000 per year; when that debt rolls off it will substantially improve operations. - Projected revenue shifts: FY25 original budgeted revenue was about $5.9 million against expenses of about $5.0 million. Staff said they are modeling a FY26 scenario with roughly $1.0 million less revenue driven primarily by lower parking revenue and reductions tied to the city service agreement. - Potential one-time revenue: Staff noted a possible sale of the WPA lot (staff used $2,700,000 as an example) and recommended using one-time proceeds to defease debt rather than fund ongoing operations. - Capital needs: Staff listed roughly $9.3 million in identified capital needs across the asset base. Examples called out in presentation materials included a structural study of garages (completed July prior year), a potential roof replacement at the Wheel & Brake facility (a study estimate cited $750,000 but not required immediately), and a worst-case replacement of a South Garage membrane at $920,000. Staff recommended a structural evaluation of all garages over the next two to three years to understand life cycle and maintenance needs.

Hamer said the combination of rising operating costs (including inflation applied to salaries, materials and supplies) and declining net revenue is causing the forecasted shortfall but that the roll-off of the $650,000 annual debt payments in later years is a significant mitigating factor.

Trustees asked clarifying questions about the forecast assumptions, the inflation index used (Hamer said he used a Congressional Budget Office series), the timing of capital projects and the mechanics of showing restricted cash on the balance sheet. Staff said they will investigate the exact accounting treatment (establishing a restricted-cash GL account and whether a board action is required to formalize reserves). Hamer and other staff said more detailed budget and capital materials will be presented at the upcoming budget hearings.

The presentation concluded with staff asking the trustees for concurrence on the conceptual approach of showing restricted reserves and continuing the capital planning and life-cycle analysis for garages and other assets. Trustees did not take a formal vote on the policy change at the meeting; staff noted it would be brought back with more specific recommendations.