Waco officials preview FY27 budget, flaging conservative taxable‑value estimate and options to close $1.1M gap

City officials on June 2 reviewed a preliminary FY27 budget framework that assumes certified taxable values will fall from recent preliminary numbers and could tighten general‑fund revenues.

Blue Kostelich, assistant city manager and chief financial officer, said staff are using a conservative planning value of $17.3 billion for certified taxable values when building the proposed budget, down from MacAd’s preliminary $18.6 billion figure. “If we take MacAd’s preliminary values at 18,600,000,000, keeping our same tax rate, that brings in $99,400,000,” Kostelich said; using a conservative $17.3 billion yields $88,600,000, a $1.1 million decrease from last year at the current 75.5¢ tax rate.

The preview laid out the economic assumptions that underlie that choice. Kostelich told the council April 2026 headline CPI rose to 3.8% (core CPI 2.5%) and that the municipal cost index—what it costs the city to deliver services—was roughly 4.8%, placing pressure on both revenues and expenditures. Sales‑tax receipts are flat year‑to‑date, and building‑permit activity and values showed a modest decline versus FY25, though spring months have shown improvement.

Why it matters: a smaller certified taxable value reduces the pool of property tax revenue that supports the general fund and could force staff to choose among using reserves, pausing planned transfers, or reprioritizing spending. Kostelich said staff are preparing a menu of options to present at the June 17 budget retreat that will show tradeoffs between service levels, reserve use, and transfers to capital funds.

Details and numbers presented: the city’s draft baseline general fund is currently about $224,000,000 with reserves near $11,000,000; staff built in a 3% general salary increase for non‑civil‑service employees and 4% for civil‑service employees; $3.7 million of prior vacancy savings were removed from the baseline because turnover rates have fallen; and staff included an approximately $4.2 million adjustment tied to a TMRS retiree cost‑of‑living assumption. Kostelich said staff are also planning to reduce transfers from surplus using one‑time enterprise fund balances (about $5.1 million this year) and to reduce the cash transfer to the street maintenance fund by roughly $3.1 million in the FY27 plan.

Council members asked technical questions about the typical drop between preliminary and certified taxable values, which staff estimated at 6–7% historically and closer to 9% in the prior year, and about timing: certified values are statutory on July 25. Kostelich reiterated that the August 4 work session will present the proposed budget and the council will adopt a maximum tax rate on that date to begin the statutorily required notice and hearing process.

The city manager and finance staff stressed the preview is not the final proposed budget but a working framework; the council scheduled a budget retreat for June 17 to review options and directed staff to return with a fully developed proposed budget on August 4.