Milwaukie proposes $213 million budget that leaves reserves below 25% target; city manager flags possible future voter tax move

City Manager Emma Zegor and Finance Director Michael Osborne presented a proposed citywide budget of about $213,000,000 for the 2027'28 biennium and told the Milwaukie budget committee the plan keeps the city in the black but leaves reserves below the city's 25% undesignated reserve policy.

"This budget is, if you look at the citywide budget, all of our funds, it's about $213,000,000," Zegor said as she opened the budget message, adding the proposal reflects a mix of new revenues, organizational restructuring and reductions in capital scope.

Zegor outlined a three-part strategy that guided the last two years of budgeting: stabilize costs, more accurately capture existing revenue streams and identify new revenues. She credited recent policy changes for improving the city's near-term outlook, including an increase in right-of-way license fees for utilities, a public safety fee and a payment-card processing fee that have funded hires such as three new police officers and a behavioral health specialist.

Despite those steps, Zegor said the proposed budget holds general-fund reserves at roughly 17% in the first year and about 16% in the second ' short of the city's 25% target. "We are unable to meet that, but we still feel confident that this is a responsible budget for the city," she said, adding that staff will return quarterly on the financial stability strategy and will seek direction on a larger revenue move in early FY28 if the forecast trends persist.

Zegor warned state limits on property tax growth will complicate revenue options. "Measures 5 and 50 set cities' permanent tax rates and they capped assessed value growth to 3% annually," she said, explaining that those measures have constrained revenue growth and left many Oregon cities facing a multi-year 'cliff.'

Committee members and staff discussed the city's reserve policy and tax capacity. Zegor told the committee Milwaukie has some room within its tax cap because voters previously annexed fire service into the Clackamas Fire District, but tapping that room would require asking voters for permission.

The budget shifts some capital spending to operations through a higher capitalization threshold (proposed to rise from $10,000 to $25,000) and creates two new funds ' a tree fund to retain tree-related permit and fine revenues and a public art fund to retain the city's 1.5% for art receipts so those amounts are not swept to zero each year.

Osborne highlighted that projected revenues for the general fund increase by about $3.5 million, while expenses rise roughly 16%, driven largely by labor settlements and rising health-insurance costs. He said staffing levels had recently improved and emphasized a $1.5 million contingency in the proposed budget.

Zegor closed by asking the committee to review the budget book and submit questions in writing by Wednesday, April 29, so staff could prepare detailed answers for the next meeting, when department directors will present line-by-line budgets. The committee continued the public hearing and department presentations to May 2, 2026, and the budget is scheduled for council adoption voting on June 2, 2026.

The next scheduled meeting will include department directors for detailed questions and an opportunity for the committee to take a poll on whether to move the budget from proposed to adopted.