Finance team reports tighter revenues, steady personnel costs; dedicated funds carry sizable balances

Lexington-Fayette Urban County Government finance staff reported to the Budget, Finance & Economic Development Committee on March 18 that general fund revenue collections are running modestly ahead of budget through the first eight months of the fiscal year while operating and capital spending timing has produced a narrower surplus than in recent years.

The presentation outlined month-to-month and year-over-year trends and provided the first public, quarterly-format view of several dedicated funds, including the urban services fund, sanitary sewer, water quality and landfill funds. Finance staff said most variances reflect timing and encumbrances rather than newly emerging structural gaps.

Wes, a member of the finance team who presented the revenue slides, said revenue collections are “exceeding the budget through the first 8 months of the year” but added the margin is smaller than in recent years. “Snug is the term that we've used a few times,” Wes said, describing the narrower positive variance compared with the post‑COVID revenue boom.

Why it matters: the committee is beginning budget season and members said they need this level of detail to assess carryforwards, reallocation requests and the health of funds that are capital‑heavy or legally restricted.

Key takeaways

- Revenues and payroll: Finance staff reported payroll withholding is approximately 2.5–2.6% above budget for the year to date and roughly 5% higher year over year. A recent mailing issue produced a one‑month timing variance of about $100,000 in payroll withholding that staff said has been resolved.

- Personnel and payouts: Director Luker and others said personnel expenses remain close to budget (within about 3%). CAO Sally Hamilton observed the city is still “$5,600,000 under budget in personnel,” noting the city increased staffing and compensation in the FY‑25 budget and that higher spending this year partially reflects those additions. Finance staff cautioned that some payout categories (sworn vs. non‑sworn leave payouts) can create year‑to‑year movement.

- Insurance and franchise fees: Insurance revenue is about $760,000 over budget year to date. Franchise fee payments included one late payment that staff said has now been received and will reduce the reported negative variance in a future month.

- Operating categories and encumbrances: Professional services and repairs and maintenance are the primary operating variance drivers; much of those lines are encumbered on contracts and will be spent later in the fiscal year. Director Luker said capital spending is “hit or miss” based on project timing.

Other funds (urban services, sanitary sewer, water quality, landfill)

Commissioner Hensley presented a new, quarterly format for several dedicated funds that are restricted to specific uses and “roll” their balances forward year to year rather than being reallocated at fiscal year end.

- Urban services fund: The fund is formed from refuse collection, street lighting and street cleaning revenues, and most of its property‑tax revenue is collected by Dec. 31. The fund began the year with about $25.9 million and staff reported an almost $28.0 million balance in the December report; the refuse activity contains most of that balance. Street lights were reported in a positive position by roughly $800,000 after prior rebalancing.

- Sanitary sewer and water quality: These funds operate with an operating and a construction component and are the primary funding source for system rehabilitation, pump station maintenance and consent‑decree work. Commissioner Hensley said sanitary sewer entered the year with a $24.6 million fund balance and water quality with about $29.5 million. She also said the city expects significant capital obligations tied to consent‑decree requirements; in her remarks she cited “what we believe is a hundred million dollar obligation between now and 02/1930” as the period staff used for long‑term planning in the slide deck.

- Landfill fund: Because the landfill has an active facility, state and environmental rules require retention of a portion of cash for post‑closure or remediation needs. The landfill entered the year with a roughly $39.0 million fund balance. Staff had budgeted for a roughly $2.0 million negative position in December but reported being about $1.2 million positive at that date.

Questions and next steps

Committee members asked for follow‑up on specific lines, including fines and forfeitures (Councilmember Sheehan) and whether fines are timing or behavioral changes; staff said they will research division‑level activity and return with more detail. Councilmember Gray asked about the higher year‑to‑date personnel spending compared with last year; staff explained that FY‑25 budgets and additional positions drove higher spending while year‑to‑date balances remain positive against the FY‑25 personnel budget.

Commissioner Hensley told the committee these dedicated funds will be reported to the committee quarterly going forward and invited feedback on the new presentation format.

Ending: Staff said they will provide March reporting in back‑to‑back months for the committee to compare the Dec. 31 snapshots with March activity, and they encouraged committee members to request line‑level follow‑up if desired.