Council hears budget briefing showing $1.5M carryover gap; staff urges considering voter-approval tax rate or fees

Finance staff presented an update on the city's fiscal-year 2026 budget and preliminary planning for FY2027, saying the current adopted FY2026 budget will close with an estimated $1,500,000 shortfall unless departmental savings materialize. The presentation noted flat sales-tax projections, a concentration of collections (25% of sales-tax collections from a single taxpayer), and an assessed general-fund operating split where public safety accounts for roughly 57% of recurring expenditures.

"To close the fiscal year 2026, $1,500,000 budget deficit, the only viable option is to rely on potential savings within departmental expenditures," the presenter said, calling out personnel and health-insurance cost pressures as primary drivers of future expenditures. Staff outlined three scenarios for FY2027 budgeting: (1) raise the property tax up toward the voter-approval rate (preliminary estimates showed a voter-approval ceiling several cents above the current 30¢ rate); (2) adopt the no-new-revenue rate, which may be higher than the current rate but would not be considered a tax increase under state law; or (3) reduce the property-tax rate and rely on fund balance with consequent recurring deficits.

Staff stressed that the FY2027 forecast shows expenditures outpacing revenues (staff cited a projection of $46.1M in expenditures versus roughly $42.5M in recurring revenues under some scenarios), producing structural pressure that could lower the general-fund reserve toward or below the city's 25% benchmark within several years if unaddressed. Council members debated options including targeted expenditure reductions, potential hiring priorities, and whether to pursue a voter-approved revenue option. No tax change was adopted; staff will return with further analysis and proposed ordinances as figures become certified.