Waco staff outline fiscal trade-offs for proposed TMRS enhanced COLA options

Assistant City Manager and CFO Blue Kostelich briefed the council on potential enhanced Texas Municipal Retirement System (TMRS) cost‑of‑living adjustment options and the budgetary implications on Feb. 3.

Kostelich said TMRS actuarial updates were not yet complete and that the presentation used existing plan numbers. He presented three practical options that staff expected to analyze further; the two discussed in detail were a 50% enhanced COLA and a 70% enhanced COLA. Kostelich estimated the city-side fiscal cost at about $6,100,000 for the 50% COLA and nearly $11,000,000 for the 70% COLA, and he framed those dollar figures against departmental funding: $6.1 million equals roughly one to 1.4 years of funding for some general-fund departments or about 34% of available cash for street maintenance, by his equivalency examples.

Kostelich showed projected contribution trajectories through 2036 under current trends and said a 50% enhanced retroactive COLA would reduce the city’s funding ratio to about 77.2% initially before rebuilding over time; he noted most peer cities operate at a 2-to-1 employer match and that Waco previously adopted a 30% repeating option in 2023. He warned an ad hoc (one‑time) COLA has downsides compared with a repeating enhancement because ad hoc changes only affect current retirees and can raise longer-term actuarial costs.

Kostelich told council staff would scrub department budgets, evaluate service-level impacts and bring detailed options for council consideration at the June 2026 budget retreat. Council members asked for comparisons with nearby McLennan County municipalities and for additional modeling to accompany the recommendations.

No formal action was taken; staff sought direction and said they would return with budget‑level options.