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McMinnville staff outlines $3 million budget shortfall; seeks cuts and capital set‑asides
Summary
City finance staff told the council the general fund’s ongoing expenses are outpacing recurring revenues, producing a roughly $3 million gap for fiscal 2025; staff proposed $2.3 million in operating reductions plus a $700,000 capital set‑aside to begin replenishing deferred facility maintenance.
McMinnville city finance director Katie Henry told the City Council during a work session that the city faces a roughly $3 million shortfall in ongoing revenues and expenses for fiscal year 2025.
“The added revenues for 2025 are 3,800,000,” Henry said during a slide presentation, then explained how annual personnel, benefits and materials and services increases have consumed that revenue. Henry concluded: “between what we have already there, that requires a cut of 2,300,000.”
City Manager Jeff Towery framed the problem as the result of long-term trends as well as recent changes: “The city started deficit spending 15 years ago, and has consistently spent that down over more than a decade,” he said, noting the city’s reserve has been drawn down and is no longer available to smooth the current gap.
Why it matters: staff said the shortfall stems from faster growth in personnel costs and benefits than the city’s main ongoing revenue sources. Henry showed property tax, franchise fees and state‑shared revenues make up roughly 75% of the city’s ongoing revenue base and that the city has been modeling a roughly 3% baseline increase. But higher salary step increases, a realignment of base wages implemented in 2023, benefit cost increases (driven largely by PERS) and rising materials-and-services costs outpaced that growth.
Henry singled out PERS as a major driver of benefit cost escalation and stressed some elements are outside local control: “this PERS is not something that we have the option of just sharing with the employees or of deciding we want to pay it or we don't want to pay it,” she said. Councilors pressed for more specificity on PERS and forecasting; Henry and Towery said staff will return with more analysis.
Council reactions and next steps: Council members asked about timing, prior-year decisions and the city’s ability to forecast. Councilor Chris Tokalski asked whether forecasting tools were available earlier; Henry said the city is acquiring new budget software but that staff will use existing tools now to produce forecasts. Towery said staff will present a recommended balanced budget later in spring and start the formal budget committee process on May 15.
On specific priorities, staff told the council the proposed $3 million adjustment is a combined total: roughly $2 million in ongoing operating reductions and $1 million focused on capital; for the 2025-year view staff recommended setting aside $700,000 for capital projects (to begin replenishing deferred facilities maintenance) and $2.0 million in operating cuts, bringing the suggested total nearer to $3 million.
Council members repeatedly returned to the question of deferred maintenance and service levels. Councilor Doug Geary said some capital investments are intended to prevent program shutdowns: “If we don't start to look at a facilities plan, they will become unsafe and unusable, and we'll be talking about shutting down programs,” he said.
Staff commitments: Henry and Towery said departments are reviewing near‑term savings and that some reductions will be implemented in the current fiscal year to limit the depth of cuts required for 2026. Henry pledged to deliver detailed fiscal forecasts to the council and to be transparent about items considered but not included in the proposed cuts. Towery said the city would present a balanced budget recommendation in April/early May and proceed through the budget committee process and council adoption in May and June.
What remains open: staff noted some numbers — notably PERS projections and long‑term insurance cost increases — depend on outside bodies and markets. Council members asked staff to return with: (1) a clearer breakdown of why the current budget drew on reserves last year; (2) multi‑year forecasts showing the impact of proposed reductions; and (3) clarification about which reductions would be reversible by future councils.
The council did not take policy votes during this work session; staff said formal budget proposals and any recommended reductions will be public before the budget committee meets.
