City finance officials present tentative tax budget and propose changes to stabilization ("waterfall") policy for $42M FY25 carryover

Director of Finance Steve Webb presented the city's tentative tax budget to the Budget & Finance Committee on Dec. 8, recommending the calendar-year 2027 property-tax millage remain at its current level and reporting a projected fiscal-year 2027 general-fund deficit of roughly $32.1 million (about 5% of the projected FY27 general fund). Webb said the department moved revenue forecasting in-house after an RFP because external proposals were expensive and the in-house statistical model had produced useful back-tested accuracy; he warned that net-profit (business) estimates have fallen about 35% year-over-year so far and that payroll-withholding remains the largest and most stable portion of income-tax revenues.

"The projected deficit is equal to just over 5% of the projected fiscal year 27 general fund budget," Webb said, noting the administration plans to close the gap through combinations of revenue enhancements and spending reductions and will update the forecast with more months of data before the final budget.

Assistant City Manager William Weber and finance staff then laid out how the city would apply the $42 million FY25 carryover under the existing stabilization funds policy and a set of proposed changes. Staff proposed formally increasing the general-fund contingency (weather reserve) from 2% to 2.3% of prior-year revenues in order to maintain a total target reserve near 17%. They also proposed creating a new $500,000 special-events support account and splitting the bottom-of-waterfall capital allocation into two 50% buckets: one for infrastructure and capital projects (fleet, equipment, facilities, technology) and one for housing and economic-development capital projects.

The proposed waterfall application earmarked funds for: an additional $2M pension contribution; $5M to an Affordable Housing Trust Fund; roughly $16.6M of one-time items including retroactive pay for IAFF firefighters ($6.7M) and other negotiated labor adjustments; replenishment of a $5.42M weather-reserve draw for police public-safety measures; and $1.1M for human-services contracts carried from the prior year. That allocation leaves a relatively small amount (about $1M) to split at the bottom between the capital reserve buckets. The mayor's companion ordinance recommended dollar-level uses for some capital items (for example, $600k for pothole and paving equipment and $400k for fleet needs).

Council reaction split along predictable fiscal-policy lines. Several members asked for follow-up analyses: how reserve targets compare with peers on an expenditures basis, the potential borrowing-cost savings from a rating increase, and the long-term path to reduce pension liabilities (which rating agencies treat like debt). Council members also questioned whether the city should calculate minimum reserves on revenues (the current approach) or on expenditures, and requested more detail on the $5.42M public-safety draw and how quickly the city can reallocate available carryover.

What's next: Committee members agreed to hold many of the carryover/waterfall items until January for additional review and follow-up presentations; staff committed to produce the peer comparisons, the debt-cost / rating-savings analysis and more detailed breakdowns of the proposed carryover uses.

Sources: Presentation and Q&A with Director Webb (Finance) and Assistant City Manager William Weber; stabilization-policy slides and mayoral ordinance details.

Ending note: Council scheduled follow-up briefings in January and asked staff for concrete analyses—especially on debt-service savings from potential improvements in the city's credit rating and on expenditure-based reserve comparisons.