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San Marcos previews preliminary FY2026–27 budget; staff says general fund can be balanced now but gaps remain
Summary
City staff told the council that, based on the preliminary tax roll and updated revenue assumptions, the FY2026–27 general fund can be balanced for the coming year, but the long-term forecast shows a growing shortfall without further action or revenue. Staff urged caution because certified rolls and legislative changes could alter final rates.
City staff presented a preview of the preliminary fiscal year 2026–27 budget at the San Marcos City Council work session on May 19, focusing on the general fund, revenue assumptions and near‑term choices for the council.
Finance Director John Locke told the council that the city received a preliminary tax roll and is using conservative assumptions while awaiting the certified roll. "The current rate is 65.15 cents and that'll generate about $46 million for operations," Locke said, showing how the city arrives at operational revenues under the current tax rate.
Why it matters: staff said a combination of restrained departmental spending, a retirement‑incentive program and updated revenue assumptions have closed the initial projected $4 million shortfall for FY27, producing what staff described as a structurally balanced position for the coming year. But the forecast shows those shortfalls growing in later years absent sustained revenue or policy changes.
What staff showed and recommended: the presentation reviewed key assumptions. Sales tax collections have rebounded from an extended negative trend and staff recommended a conservative 1.8% sales‑tax growth assumption that counts expected new retail (including H‑E‑B and Buc‑ee's) while recognizing prior volatility from a single large taxpayer. On property tax, staff explained the distinction between market, assessed and taxable value, and noted they used a historical allowance for protests when moving from preliminary to certified rolls.
The packet also recommended one‑time uses of fund balance above the required 25% reserve: roughly $1 million toward City Hall needs, $1 million to shore up the city health‑insurance fund (with proportional contributions from other funds), $1 million for capital outlay requests and $200,000 to continue participatory budgeting. Staff identified 110 capital outlay requests totaling about $11 million and 82 personnel requests totaling about $10 million.
Council questions and next steps: council members asked for the same clear, comparative slides used last year that show what services would or would not be funded at different tax rates and how San Marcos’ revenue mix differs from peer cities. Staff agreed to provide those materials at the June 25 budget workshop and noted the August 18 deadline when the council must set the maximum proposed tax rate. Final tax‑rate calculations await the certified roll at the end of July.
Bottom line: City staff recommended proceeding with a conservative revenue plan that balances the FY27 general fund now, while returning in June with more detail and in August with a formal proposal once the certified tax roll is available. The council retained discretion to adjust rates, reallocate one‑time funds or revisit service‑level choices before formal adoption in September.
