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Leon Valley workshop flags $571,000 projected operating shortfall and trade-offs for FY2026–27 budget
Summary
At a nearly four-hour budget workshop July 14, Leon Valley staff presented a draft FY2026–27 budget that reflects declining property valuations and a projected operating deficit of about $571,000. Council and staff discussed options including reserves, reallocation of fund revenues, staffing/salary choices, program cuts, and clarifications on overtime methodology for the fire department.
City finance and management staff presented a draft fiscal-year 2026–27 budget to the Leon Valley City Council on July 14 and warned of a significant operating gap.
Staff explained recent certified property-valuation updates from the county showed a 2025-26 decline of roughly $53 million and projected an additional loss near $41 million for the next cycle; those valuation shifts produce lower ad-valorem receipts and drove staff’s preliminary projection of a roughly $571,000 operating deficit for the general fund. "Your operating deficit is $571,000," the city manager said, and staff said they hoped to get updated county valuations and health-insurance rate estimates by July 20 so the packet for July 21 could be further refined.
Council and staff discussed multiple levers to close the gap: trimming personnel or freezing hiring; reallocating certain revenues and staff costs to other funds (for example, moving community-and-conference-center rental revenue to the EDC fund and reassigning staff allocation percentages); cutting or delaying capital projects; or temporarily drawing on reserves. Staff emphasized trade-offs: moving recurring operating costs into capital or enterprise funds can create future funding pressure when reserves are reduced.
A major portion of the budget discussion focused on personnel costs and methodology. Finance staff estimated a personnel-services increase of 6.7% and assumed a 15% rise in health-insurance costs as a working scenario; the manager said health-insurance increases could add about $185,000 to next year’s cost picture. Council questioned overtime accounting for the fire department after staff reclassified amounts that previously sat in salary lines into an overtime bucket to better reflect mandatory overtime under FLSA rules for fire pay cycles. Staff reported year-to-date fire overtime near $195,000 and explained the conversion was intended to improve transparency; council asked staff to provide more trend data and the underlying calculations.
Council also reviewed capital priorities: options and engineering for a possible pool project (planning and design funds), planning for a property/evidence room study, and possible renovations to the Public Works building. On parks and events, members debated the cost-effectiveness of a large July 4 production versus ongoing quality-of-life investments such as the pool, library services and parks maintenance. Staff said sponsorships reduce special-event costs but recommended budgeting conservatively.
Council directed staff to return July 21 with updated property-valuation figures and health-insurance estimates and said members would forward any additional budget questions before the next session.
