City finance officer warns of larger shortfall; council sets public hearings on nearly $3 million in capital notes

Finance Officer O'Donnell presented Ottumwa's fiscal year 2026 second‑quarter report on Feb. 17, warning council members that while some revenues were on pace, several streams lagged and personnel and commodity costs were pressuring budgets.

The FY26 budget adopted April 15, 2025 estimated $76,429,920 in revenues against $84,559,834 in expenditures, a gap that had been planned to be covered in part by reserves and timing of capital draws. O'Donnell said Q2 revenues across all funds were roughly 46.7% and general fund expenditures sat at 47.48% of budgeted amounts. "We had revenue estimates of 76,429,920 against expenditure estimates of $84,559,834," O'Donnell said.

The report flagged building‑permit and rental‑permit revenue shortfalls, timing delays in some intergovernmental receipts (including a housing commission payment expected later in spring) and elevated overtime in the fire department — overtime is tracking above budget and the department’s overall wage line exceeded 50% for the year‑to‑date. Staff also said landfill and recycling revenues varied; recycling faces market pressure finding buyers for recyclables.

Looking ahead, O'Donnell told council a larger gap in the draft FY27 budget would require significant reductions and could affect service levels. "We're still going to have a significant shortfall that will require significant reductions and it will affect service levels," staff said, warning that the city could not simply "nickel‑and‑dime" the difference away.

Separately, council passed resolutions setting public hearings for two bond issuances: Resolution No. 31‑2026 sets a public hearing on authorization of up to $950,000 in general‑corporate capital loan notes (these are subject to reverse referendum limits), and Resolution No. 32‑2026 sets a hearing for up to $2,000,000 in essential‑corporate capital loan notes. Finance staff and bond counsel will present a detailed list of projects at the public hearing; staff said the issuance structure is intended to hold the debt‑service levy roughly level so the new borrowing should not increase the levy beyond the budgeted assumption.

Council members asked about the timing of property‑tax receipts (big payments arrive in June and September), the classification of projects between general and essential corporate purposes, and how debt service had been structured to avoid spike‑and‑drop swings in the levy. O'Donnell said staff would return with more detailed project lists and recommendations for FY27.

The council received the Q2 report and approved the bond‑hearing resolutions on a recorded roll call.