Title
Discuss and receive a presentation on the Fiscal Year 2026-27 Budget Update, including fiscal outlook, revenue considerations, strategic investment areas, and ongoing budget development topics.
Body
REQUESTOR:
Finance and Fleet Management Department
BACKGROUND:
The annual budget process serves as the City’s primary financial and policy-planning tool, ensuring that available resources are intentionally aligned with the City Council’s strategic priorities, including infrastructure reinvestment, neighborhood stability, mobility, economic vitality, public safety, and the maintenance of a high-performing organization. These priorities were affirmed during the February 2026 Strategic Planning Session and have guided the development of the proposed Fiscal Year (FY) 2026-27 budget.
At the April 21, 2026, Study Session meeting, staff kicked off the FY 2026-27 budget process by providing an overview of the City’s budget process, information on the City’s strategic focus areas, and the budget cycle timeline.
At the May 5, 2026, Study Session meeting, staff continued budget discussions by providing additional information regarding the City’s budget structure, revenue outlook, and infrastructure funding needs. Staff updated Council on the status of departmental budget submissions and internal administrative review efforts and discussed preliminary FY 2026-27 operational priorities. Council emphasized continued long-term financial planning and transparent public communication and requested follow-up information regarding the anticipated tax rate, utility-rate impacts, grants, community-event costs, and historical Minor Home Repair Program expenditures.
At the June 2, 2026, Study Session meeting, staff provided updates regarding current revenue and expenditure conditions, utility infrastructure funding needs, community-centered programs, grants, and strategic investment considerations. Additional discussion included changes to Business Personal Property exemptions, appraisal district protest activity, sales tax volatility, NTECC cost increases, healthcare cost considerations, and utility infrastructure investments. Council expressed support for continued expansion and promotion of the Minor Home Repair Program and requested additional information regarding community-event expenditures and the increase in the City’s NTECC allocation.
At the June 16, 2026, Study Session meeting, staff continued budget discussions by providing updates regarding current budget development efforts, property tax, sales tax, employee compensation, fee considerations, and other fiscal matters impacting the development of the proposed FY 2026-27 budget. Council requested additional information regarding projected healthcare costs and employee contribution levels.
At the July 7, 2026, Study Session meeting, staff provided updated information regarding sales tax performance, the proposed increase in the Revenue Stabilization Fund transfer threshold from $23.0 million to $23.5 million, water and wastewater utility rates, and the City’s long-term strategy of funding infrastructure investments without issuing utility debt. Consistent with Council direction, the Firehouse Theatre sponsorship was removed from the proposed FY 2026-27 budget and is being evaluated for funding during the current fiscal year. Staff also presented the results of the Medical and Pharmacy Benefits Request for Proposals, including the recommended medical and pharmacy administrators and the projected financial impact of employee healthcare costs for FY 2026-27. Council requested additional follow-up regarding the employee health plan and a future discussion of the Code Care Program.
This study session continues the phased budget-development approach by showing how direction received throughout the process has been incorporated into the proposed FY 2026-27 budget and by focusing on employee compensation, fee adjustments, and other operational funding considerations currently being evaluated. Staff will also provide an overview of the remaining budget-calendar milestones, including the planned September 1, 2026, discussion regarding FY 2025-26 end-of-year budget adjustments. At that meeting, staff anticipates presenting any budget amendments necessary to align departmental and fund-level appropriations with projected year-end activity, as well as seeking Council feedback regarding the potential allocation of any resulting surplus funds.
DISCUSSION:
This update is intended to provide City Council and the public with additional discussion and follow-up related to several budget topics previously identified by Council during prior study sessions and ongoing budget-development discussions. It also continues the City’s transparent, incremental, and policy-focused approach to developing the proposed FY 2026-27 budget prior to formal budget adoption.
As part of the City’s fiscal-year closeout process, staff is reviewing FY 2025-26 revenue and expenditure activity, departmental projections, outstanding obligations, and individual general ledger accounts. This review will identify accounts that may require additional appropriation, accounts that are projected to finish below budget, and any resulting preliminary year-end surplus.
Staff anticipates returning to the City Council on September 1, 2026, to discuss the necessary end-of-year budget adjustments and receive Council feedback regarding the allocation of any available surplus funds. Consistent with prior-year discussions, potential uses may include one-time expenditures, deferred projects, strategic investments, increased reserves, or the reduction of long-term liabilities. Last year’s end-of-year presentation similarly framed the discussion around one-time expenditures, fund balance, and liability reduction. This discussion will continue Council engagement in the budget process while also establishing a clear transition from development of the FY 2026-27 budget to the financial closeout of FY 2025-26.
DISTRICT:
Citywide
FISCAL IMPACT:
Determined by the City Council direction.
POSSIBLE COUNCIL ACTION:
N/A
ATTACHMENT(S):
1. Budget Study Session After Action Reports #1, 2, 3, 4, & 5
2. Presentation