Council hears 2026 budget draft; staff proposes 1% ad valorem increase and use of reserves for one‑time capital

Finance staff presented an initial draft of the 2026 budget and opened a public hearing on a proposed 1% increase in the city's ad valorem levy that staff said would raise $14,897.

Katie, a finance staff member presenting the budget, told the council the general fund showed expenses approximately $434,000 higher than projected revenues and that the city's primary revenue source is local sales tax. She said the draft relies on beginning fund balance for one‑time capital and maintenance needs rather than ongoing operations.

“Our focus for our general fund is our police and fire because of our focus on public safety,” Katie said, describing the budget priorities and the staff recommendation to use beginning fund balance to avoid drawing down operations. She said the city has a healthy beginning fund balance and that staff feel comfortable using a portion of it for 2026 one‑time needs.

Notable budget items and clarifications from the presentation: • Ad valorem tax: staff said a 1% allowable increase (exclusive of revenue from new construction or annexation) would raise $14,897 and asked the council to move the ad valorem ordinance to a second reading for additional review. • Reserves and fund balances: staff proposed targeted use of beginning fund balance for one‑time projects such as the well house for a new well, pool maintenance and park projects but said they do not intend to use beginning fund balance for recurring operating expenses. • Transportation Benefit District (TBD) and streets: Katie said TBD tax revenues total about $580,000 and that the streets fund is primarily operations with some storm drain earmarks; staff plan to leverage TBD with grants for street projects. • Parks and REIT funds: staff propose rolling REIT and other transfer funds to finance multi‑use court construction (roughly $600,000 combined after previous delays) and noted the pool requires maintenance that has been deferred for years. • Cemetery: staff said the cemetery is typically run at a loss and is subsidized; the city holds a non‑spendable ‘‘cemetery forever’’ donation fund where only interest may be spent. Council and staff discussed maintenance frequency and cost.

Council discussion focused on transparency of fund balances and timing. Councilmember Sarah asked whether fund balances and the effects of the proposed uses could be shown on the budget spreadsheets; staff said reconciled beginning fund balance figures will be provided as part of the ongoing budget process. Katie said she expects to present more reconciled fund balance details in subsequent budget work sessions.

Ordinance and next steps: council conducted a first reading of Ordinance 25‑07 (ad valorem tax) and — on staff recommendation — moved it to a second reading to allow additional review. The budget itself remains a draft pending further reconciliation and the council will consider formal adoption after subsequent readings and hearings.

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