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Topeka officials warn FY27 budget likely structurally unbalanced; options include taxes, transfers and cuts
Summary
City staff told the Topeka governing body that without new recurring revenue or expense reductions the FY27 budget will be structurally unbalanced, citing drawn‑down reserves, high public‑safety personnel costs and gaps in several special funds; council asked staff for targeted data and will reconvene in about 30 days.
City of Topeka finance staff told the governing body at a special Jan. session that the preliminary fiscal‑year 2027 outlook is structurally unbalanced unless the city pursues new revenue, reallocates funds or reduces recurring expenses.
"We are spinning down reserves like we said the last two budget cycles," Josh, the city budget lead, said as he walked council members through fund balances and revenue trends. Staff reported the city's general‑fund expense budget is roughly $133,000,000, of which about $81 million is dedicated to public‑safety personnel costs and about $10,000,000 covers the city's health‑insurance fund.
Why this matters: staff said the city used built‑up reserves in 2025–26 to balance operations and that, without structural changes, the general‑fund balance would fall below the council's 15% policy in 2027. Council members were told that several enterprise and special funds—most notably the parking fund, the special highway (gas‑tax) fund and parts of the utilities funds—face recurring‑revenue shortfalls that may require rate increases or subsidies.
Staff outlined several policy options under consideration: placing a sales‑tax measure before voters (staff gave example revenue math: each 0.1 percentage point of sales tax is roughly $4,000,000, so a half‑cent or 0.5% could yield about $20,000,000), transferring funds between accounts where legally allowable, pursuing targeted cuts or hiring freezes, and phasing fee increases (planning/permitting fees could require a single‑year increase of 25–30% to achieve revenue neutrality, or a smaller phased increase over multiple years).
Council members pressed staff for specifics. Councilwoman Ortiz asked how 2025 closed; staff said the city spent about $127,400,000 in 2025 and used roughly $6,000,000 of built‑up reserves to plug a gap after some transfers and interest allocations reduced an earlier $9,000,000 estimate. Council members also asked for department‑level analyses showing the top cost drivers over five years, a list of current vacancies, and the legal parameters for specialized funds such as the opioid fund (staff said the opioid fund—approximately $1,300,000—can be used for training and Narcan purchases where allowable).
On capital planning, staff reminded the council that the CIP drives future bonding needs and gave an example: a $10 million bond at 5% over 15 years raises annual debt service by roughly $1,000,000, which the debt‑service fund must carry. Staff also described a proposed downtown ~190‑unit development that would use about $2.6 million in upfront cash (a $1.5 million economic‑development grant repayable over 25 years plus a $1.1 million partial purchase).
Staff emphasized constraints and timing: utility rates are set through 2026 and will be revisited this year; bond covenants require a 1.25 debt‑service coverage ratio and staff recommended consulting bond counsel before altering rate or fund strategies. The city manager and budget staff said they will return in about 30 days with the requested details and build further projections as revenue and expense data from the first months of the year become available.
Next steps: staff plans a follow‑up work session in roughly 30 days, a spring review of the CIP, and the typical May–September budget process toward adoption.
