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City manager flags $614,000 shortfall in first reading of FY2027 budget; warns of tax‑rate pressure
Summary
City Manager Dr. Caldera presented a first reading of the FY2027 budget, warning of a projected $614,000 general‑fund shortfall and possible upward pressure on the no‑new‑revenue tax rate amid $41 million in recent property valuation losses; staff recommended avoiding use of reserves for ongoing operating costs.
City Manager Dr. Caldera opened the council’s budget discussion Tuesday with a wide‑ranging first reading of the city’s proposed FY2027 budget, warning that early estimates show a general‑fund structural gap and recommending that council avoid using reserve funds for recurring operating expenses.
“The big thing for y’all to take from this budget presentation…is for y’all not to use your reserve fund for ongoing operating expenses,” Dr. Caldera said, urging a multi‑meeting review before adoption. She said the city faces valuation declines that reduce property‑tax revenue: after appeals the city’s beginning valuations were lower than last year and staff is anticipating another roughly $41 million in valuation loss for the coming year.
Dr. Caldera said those valuation shifts make the city’s no‑new‑revenue tax rate likely to increase (she suggested it could land closer to 0.56 than the current 0.54 assumption), and she urged council members to plan conservatively. Staff presented the city’s fund balances — including combined reserves in excess of $6 million across funds — and outlined capital priorities: a property‑room build‑out, vehicle and equipment replacements, a planned pathway/hike‑and‑bike grant, and a proposed $800,000 engineering program for a major erosion project in the Huner Natural Area (storm‑water enterprise fund).
On personnel and benefits, the draft budget includes step increases, a proposed cost‑of‑living adjustment and an allowance for a significant health‑insurance increase (staff modeled a 15% rise as a planning assumption). Dr. Caldera said personnel costs remain the largest portion of general‑fund spending and that tracking benefits and market competitiveness is necessary to retain staff.
The fiscal picture Dr. Caldera presented showed projected operating revenues near $15.7 million (after assigned funds), total expenditures net of capital at about $16.3 million and a resulting initial general‑fund gap of about $614,000. Staff said they will present options — revenue and expenditure adjustments — and hold a public hearing as required by statute.
Next steps: Council scheduled additional budget work sessions and a retreat; staff will return with more detailed options, updated revenue estimates when the county’s no‑new‑revenue rate is confirmed, and targeted proposals for closing the gap before final adoption.
