Special Fiscal Committee Meeting – February 17, 2026

The Special Fiscal Committee met to review the 2025 year-end financial report, discuss the December deliberation session on council priorities, and plan future meetings. The committee heard public testimony urging timely publication of the Annual Comprehensive Financial Report (ACFR) and considered process improvements for outcome-based budgeting.

Public Comments & Testimony

• Kevin Keo, a resident, advocated for the city to formally prioritize timely completion of the ACFR. He noted the 2024 ACFR was due September 30, 2025, and remains unpublished as of February 14, 2026—nearly 14 months after year-end. Keo urged the committee to direct the administration to publish the ACFR within six months of year-end and to pursue the Government Finance Officers Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting. He emphasized that timely audited financial information strengthens budgets, improves decision-making, and builds public trust.

Discussion Items

• 2025 Year-End Financial Report (Controller Jeff)

  • Revenue: Actual vs. budget comparisons were presented for selected funds. Key differences included a supplemental local income tax (LIT) distribution of $1.3 million in the general fund and $1.7 million in the economic development LIT fund. A large revenue deficit in the police/public safety LIT fund was explained by the creation of a separate PSAP (dispatch) fund in 2025, which redirected revenue originally budgeted in public safety LIT. Council members asked about negative revenue in ITS and the need for a comprehensive diagram showing revenue sources for each fund, including inter-fund transfers. The controller agreed to provide further detail on inter-fund transfers and revenue sources.
  • Expenditures: Differences between adopted/amended budgets and actual spending were shown. Unexpended balances included HR salary adjustments and a large unspent balance in public safety LIT (partly due to the PSAP transition). Council members discussed the administration’s approach to unspent appropriations; the controller noted that under the current administration, unspent funds revert to the controller’s office and are not routinely reallocated to other purposes. A council member noted that in the prior administration there was an annual reversion appropriation process.
  • Property Taxes & LIT: The controller showed that property tax revenues are expected to decrease in 2026 due to SEA 1 (tax deduction changes), and that the city has four LIT rates (certified shares, public safety, economic development, and PSAP). Several council members requested a more detailed report on how LIT is currently spent and a discussion on priorities for its use, noting that economic development LIT funds for public transportation expire soon.
  • Debt: The controller provided a 2026 debt service summary but deferred a deeper discussion on debt capacity to a future meeting with the municipal advisor.
  • ACFR Status: The controller reported that the 2024 ACFR is still in progress, likely a few weeks from completion. He explained that audits must be done sequentially by year; the city had to complete 2022 and 2023 audits before 2024 could begin. The 2025 annual financial report (AFR) is expected to be completed by February 24 and submitted by March 1, 2026. Council members asked about late fees or penalties; none exist.

• December Deliberation Session Follow-Up (Councilmember Isabel)

  • The committee reviewed the results of the December session, where council members ranked outcomes in three categories: high-performing government, housing/homelessness, and economic development. Rankings were scored (3 for first, 2 for second, 1 for third); the highest possible score was 27 per category. The group discussed whether to finish the activity for the remaining four outcome areas (public safety, transportation, etc.) and how best to collect input from all council members.
  • The controller and mayoral representative suggested narrowing the list of priorities to about 10 that are trackable and reportable, rather than pursuing a full priority-based budgeting process. Council members emphasized the value of outcome‑based (not program‑based) framing and noted that many priorities require policy changes, not just funding. There was consensus to continue the exercise and to combine it with a discussion on the long‑term structure for aligning outcomes with budgets.
  • A proposal emerged to collect virtual feedback (e.g., via Google Form) from council members on additional outcomes for the remaining categories, then hold a March deliberation session to process the results and discuss structural questions. The committee agreed to pursue this approach, with a target date of March 11 for the deliberation session.

Key Outcomes

• Next Meetings Scheduled:
  • February 27, 8:30–9:30 a.m. – Focus on council deliberation data and preparations for the March session.
  • March 13, 8:30–9:30 a.m. – Focus on controller reports (debt, funds, etc.).
  • The committee tentatively agreed to meet biweekly on Friday mornings through summer recess, alternating between council‑priority topics and controller‑led financial reports.
• ACFR Process: The controller committed to completing the 2024 ACFR within weeks and to staying current going forward. The committee took no formal action on Mr. Keo’s request but acknowledged the importance of timeliness; the controller noted the sequential audit constraint.
• Council Priority Setting: The committee will collect individual council member input on outcomes for the remaining categories (by virtual form, ensuring compliance with open‑door law) before the March 11 deliberation session. The controller and mayoral representative will review the existing outcome lists to identify which items are trackable via budget data.
• Future Agenda Topics: Council members requested a retrospective review of shared agreements from the 2024 budget negotiation to assess what was accomplished and what was delayed. The committee also discussed developing a formal synthesis document of council priorities to be considered for adoption at a regular council meeting.