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City finance director warns of growing structural deficit; projects $5.2M shortfall in 2026 and up to $8M in 2027
Summary
Commissioner Kiernan presented a Q2 finance update showing revenues lagging while recurring expenses — especially labor and overtime — are growing much faster, projecting a ~$5.2M shortfall in 2026 and a possible $8M loss in 2027 absent corrective action.
Commissioner Kiernan delivered a detailed second-quarter finance update and urged the council to adopt a multiyear, zero-based budgeting approach to address what he described as a structural fiscal imbalance.
Kiernan told the council the city's adopted 2026 budget showed a $1.8 million deficit but current projections increase that shortfall to about $5.2 million. "If we have an additional $3,400,000 loss in 2026, our unassigned fund balance will be $8,400,000," he said, noting the unassigned fund balance was $11 million at the end of 2025. He added that a worst-case projection for 2027 could be an "$8,000,000 loss in 2027," a scenario that would quickly erode reserves if unaddressed.
Kiernan highlighted specific revenue and expense items: cannabis sales were budgeted at $500,000 but had produced roughly $134,000 midyear; CHIPs/state aid is expected to produce $1.6 million in December; parking charges are seasonal and expected to meet a $490,000 target for the Memorial Day–Labor Day period; short-term rental collections were reduced in projections (from $152,000 to about $90,000) because county and platform collection agreements are not yet in place. On the expense side, he said recurring employee costs — wages, benefits and retirement — are the primary drivers. "The primary drivers are overtime," Kiernan said, noting overtime and comp time combined are projected at roughly $3.6 million for 2026 and that labor and benefits constitute about 80% of the city's budget.
Council members pressed for context. Commissioner Kiramati asked how Saratoga Springs compares to similar cities; Commissioner Cole noted the city's seasonal tourism and large special-event surges that increase public-safety staffing needs. Kiernan said the council will solicit priorities from department heads and asked commissioners to send him their policy priorities for the 2027 budget call. The update concluded with direction to the council to develop efficiencies, manage overtime, and align recurring revenues with recurring expenditures to avoid continued erosion of fund balance.
Why it matters: the report signals a multi-year structural budgeting problem driven by labor costs and certain operational commitments (overtime, comp time, new facilities). The council will face choices this fall on service levels, staffing, and potential revenue changes as it prepares the 2027 budget.
