Nacogdoches officials outline budget squeeze, weigh tax-rate options and cuts to capital projects

City of Nacogdoches officials presented a preliminary FY27 budget at a July work session, saying the city meets charter operating‑income and reserve tests under several assumptions but still faces pressure from lower preliminary property valuations, rising health‑insurance claims and major capital needs.

"Again, my name is Todd Cimino, interim finance director for the city," said Todd Cimino, who led the budget presentation and walked the council through two scenarios: Scenario A assumes a 3.5% property‑tax‑rate increase (the voter‑approval rate), while Scenario B assumes no tax‑rate change. Cimino said staff budgeted a 2% increase in payroll and used conservative 1.75% sales‑tax growth for projections.

The presentation flagged three near‑term funding pressures. Cimino said the city expects a $700,000–$900,000 loss in the self‑insurance/health‑care fund this year tied to unusually high claimants and that staff has engaged a health consultant "to smooth that out." He also cited a preliminary $119 million drop in taxable valuations, of which about $50 million is attributed to a recently enacted personal‑property exemption; certified values are expected July 25.

Council members pressed staff on where cuts would land. City leadership said several general‑fund CIP projects have been deferred to preserve a 25% reserve requirement, noting those projects could be reintroduced if external grants or bond proceeds are secured. "We're deferring CIP to later years just to try to preserve our reserves," the interim finance director said.

Longer‑term capital needs include fire‑apparatus replacement. Cimino presented a replacement plan projecting roughly $22 million in fire‑engine needs through 2044 and said it would take about $1.3 million per year to fund the program without leasing or financing. Staff cautioned that lease purchases would raise interest costs on large equipment acquisitions.

On staffing, the budget illustration includes three newly funded police patrol positions at a fully burdened cost of about $88,000 each and a cited starting base pay near $61,800. Officials stressed that roughly 25% of the city's workforce is eligible to retire, which could push future replacement‑salary costs higher.

Utilities and user fees were part of the discussion. Staff said a completed utility rate study supports about a 5.4% water/sewer increase, which staff estimated would add roughly $2.65 per month for an average household using 4,000 gallons. The sanitation fund proposal would raise residential collection by about $0.77 per month and increase disposal fees by roughly 5%.

Staff said it has identified revenue recoveries by auditing contracts and fees (for example, dispatch reimbursements and hotel‑motel revenue audits) and is evaluating a fleet‑leasing approach with a vendor that could reduce life‑cycle costs and improve resale results.

Council members also raised the city's share of sales tax and intergovernmental revenue. One member alleged the hospital district would receive about $20.1 million from a consummated sale/lease and said unpaid ad valorem tax collections of about $600,000 translate to several pennies on the tax rate; staff treated that as an assertion by a council member and did not confirm the figure during the workshop.

Staff outlined next steps: certified taxable values will be posted July 25; staff will email the no‑new‑revenue and voter‑approval (maximum) rates; the next budget workshop is scheduled for Aug. 18, a public hearing on the budget is planned for Sept. 1 and the council expects to take action on the tax rate and budget Sept. 15. The city reiterated that formal adoption requires public hearings and that the work session itself is for study and direction rather than binding votes.

The council set options for further review, directed staff to refine projections after certified values are posted and signaled interest in pursuing grants and targeted revenue audits before asking voters for rate increases. The work session adjourned with staff and council agreeing to return with more detailed, public analyses before any formal action.