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City presents balanced FY27 budget with no property tax increase and $6M in one-time capital draws
Summary
City finance presented a proposed FY27 budget with a $499 million net operating plan, no new taxes, modest capital spending cuts and use of $6 million in unassigned fund balance for one-time projects; council questioned fund balance accounting, capital priorities, staff increases and pension costs.
City leaders and department heads spent the day briefing Knoxville City Council on the proposed fiscal year 2027 budget, which finance staff described as balanced and delivered without a property tax increase.
The city27s proposed total budget is about $663.5 million, with a $499 million net budget after excluding interfund transfers and internal charges, finance staff said. That net amount is roughly 4.6% higher than the current year, driven largely by higher personnel costs and inflation. The general fund is proposed at about $344 million. Capital spending is proposed at $40.7 million, down roughly $7.2 million from the current fiscal year.
The administration proposed using $6 million from the unassigned fund balance to pay for one-time capital projects including improvements on Washington Pike, the Magnolia Avenue intersection, the South Knox Bridge Greenway and structural repairs at the LT Ross building. Finance staff said the city maintains strong reserves and a sound debt profile, and that recent reappraisals will not automatically increase city revenue because state equalization will be applied.
Council members pressed finance on how the $6 million appropriation would be recorded and whether the city is depending on fund balance to cover recurring costs. Finance responded that the appropriation is for one-time capital only and that previous years have seen larger appropriations from unassigned fund balance for capital after audits. Staff also outlined a nearly $195.2 million total cost for employee compensation across all funds and reiterated that personnel and benefit growth are the biggest long-term budget pressures.
The budget retains pay and benefit commitments, including a 2.5% ordinance-mandated increase for city employees and additional salary step increases for uniformed personnel. Staff also highlighted a proposed increase of 18 full-time positions in FY27—adding to police, parks, finance and public service staffing—but noted the budget is tighter than in prior years as slower sales-tax growth moderates revenue forecasts.
Next steps: the council can request additional breakdowns and follow-up information on capital project phasing, debt service, and the composition of the fund balance before votes on ordinances and final budget adoption.
Attribution: The budget overview and figures reported here were provided by the city27s presenter, Evans, with follow-up detail from Deputy CFO Kitron Smith and other finance staff during the legislative budget hearing.
