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Council reviews $9.5 million FY26 budget amendment covering water/sewer, HVAC, subsidies and opioid payments
Summary
Staff presented the third FY26 budget amendment, seeking $9.5 million in additional spending authority (offset by $3.2 million in revenue) to cover higher-than-expected bids on a water-and-sewer project, HVAC replacements at the recreation center, subsidies after a poor winter at Hogan, opioid-settlement payments and a federally earmarked interceptor project.
City staff presented the third (and likely final) budget amendment for fiscal year 2026, a package the memo said would increase spending authority by $9.5 million and also increase revenues by $3.2 million, for a net $6.2 million reduction across the city's funds.
Staff identified six principal items in the amendment. The largest is a water-and-sewer project (reported in the memo as a Poplar-to-Collins water and sewer effort) with bids coming in significantly higher than the original engineering estimate; staff said unique pipe and manhole work and low contractor competition drove prices up. Staff said the water fund and sewer fund both have reserves and can absorb the adjustments.
Other line items included earlier-than-expected availability of 1cent-17 collections that permit spending sooner, replacement of a recreation-center HVAC rooftop unit (RTU) with a larger-capacity unit to avoid future failures (staff noted one unit will be 46 tons, the other an energy-recovery ventilator of about 10.75 tons), subsidy adjustments for the recreation enterprise due to a poor snow season at Hogan (approximately $450,000 revenue shortfall), opioid-settlement contract payments (the amendment budgets the city's share of the payment; staff noted the county is budgeting the other portion), and a Northwest sanitary-sewer interceptor Phase 2 project that benefits from a $1.75million federal earmark on a $2.1million project. Staff said the amendment will allow timely procurement to avoid expected price increases.
Councilors asked detailed questions: why initial estimates missed the final bids, whether fund reserves were sufficient, and whether the city is relying on excess collections. A utilities official said the sewer fund reserve is approximately $8 million above requirement and the water fund about $16 million above requirement, and staff confirmed the amendment reflects known funding sources, including grant matches and earmarks.
No formal adoption occurred at the work session; staff asked for direction so they could draft the resolution/ordinance language and return for formal action.
