Finance director warns of FY2026 shortfall as building‑permit revenue lags

The Caldwell City Council received an FY2026 budget update on May 4 from Finance Director Rayan North, who said the city is tracking a material drop in building‑permit revenue that is hitting the general fund.

"Within the building permit revenue year to date, we are at a revenue deficit of about 545,000," North told the council, summarizing updated numbers through the end of April. He said that when the building‑permit shortfall and other conservative revenue projections are folded together, the city now projects a general‑fund deficit of about $477,000 for the fiscal year.

North said the shortfall is substantially smaller than an earlier projection of $1.2 million and that the current estimate of the building‑permit gap is likely to settle between roughly $600,000 and $700,000 rather than that earlier figure. Factors he cited included a slowdown in large permit activity (projects like a previously counted Home Depot and a large subdivision did not materialize), time lags between planning approvals and final permit pulls, and the recent adoption of new traffic‑impact and other user fees that can affect local competitiveness.

Council members asked whether the decline was a local market difference or part of a broader trend. North said neighbors have seen differing patterns — some jurisdictions saw unexpected permit strength while others experienced declines — and emphasized the city's reliance on building fees to help offset public‑safety costs that cannot be covered by property tax increases due to state limits. Several council members raised House Bill 389 and its effect on property‑tax capacity; North said the bill limited levy capacity and shifted more pressure onto fee revenues.

North also walked through other budget details, including obligated ARPA expenses requiring a rollover budget amendment, a multi‑year fire contract that is budgeted as an encumbrance across years, and capital encumbrances for two fire trucks and a ladder truck that will be paid over future budgets. He indicated some projects and department line items could be deferred to contain the general‑fund gap.

Council members asked about options for FY2027, including a potential public‑safety levy that would require a ballot decision and not affect the current fiscal year. North said timing for a ballot measure would need to be decided early in August and that such a levy would not provide relief for FY2027 until after voter approval.

City staff and council said they would continue monitoring revenues, update the council with quarterly treasury reports, and consider budget amendments and possible use of reserves while balancing long‑term service needs.