Fayetteville City Council Reviews Proposed 2027 Operating Budget - October 26, 2026

On October 26, 2026, the Fayetteville City Council held an informal meeting to review the proposed 2027 operating budget. City staff presented a $291.9 million all-funds budget, an increase of 6.6% (approximately $18 million) over the 2026 adopted budget, and introduced 15 proposed new full-time equivalent (FTE) positions. The budget will be formally considered at the November 10 agenda session and the November 17 City Council meeting.

Budget Process & Timeline

• The 2027 draft budget was delivered to council more than a week earlier than in prior years, per council request.
• A new Budget in Brief document provides a condensed summary with simplified tables and charts.
• All departments completed a planning exercise assuming a 15% budget reduction scenario; the city took very few of the suggested cuts, and the resulting citywide average reduction was approximately 2.5%.
• The exercise was a direct follow-through on a council request from the prior year's budget discussions and will be repeated and refined in future years.
• Carryover programs from prior fiscal years (capital projects, multi-year grants, CDBG, bond projects) can total up to $350 million and will be addressed in the first quarter of 2027 reappropriation budget.
• Total all-funds budget: $291.9 million; general fund 28%, water and sewer fund 25%, sales tax bond fund 12%, recycling and trash fund 7%.
• Personnel services account for 35% of total expenditures; primary increases are tied to the new council-approved pay plan, two mid-year 2026 hires, and the 15 proposed 2027 FTEs.
• Fuel expenditures increased by $1.7 million citywide; regular unleaded is budgeted at $4.25 per gallon and diesel at $5.50 per gallon (up from $4 each in prior years).

Proposed Personnel Additions (15 FTEs)

• 1 engineering project manager, funded by the voter-approved $56 million 2026 transportation bonds.
• 1 facilities custodian, offset by a reduction in temporary services expense.
• 2 police school resource officers (SROs) per Resolution 190-22, bringing the total to 17 as the city works toward staffing all Fayetteville Public Schools.
• 4 police officers to oversee parks and trails amid continued park and trail expansion.
• 1 deputy utilities director (water and sewer fund).
• 5 water and sewer positions (1 crew leader, 2 maintenance worker IIIs, 2 maintenance worker IVs) forming two new crews for capital improvement projects and water-loss reduction.
• 1 stormwater staff engineer focused on stormwater capital projects, inspections, and maintenance.
• The city's FTE count is currently 970.1 (968.1 adopted for 2026 plus 2 mid-year additions); the proposed additions would bring it to 985.1.

General Fund

• Proposed budget of $81.267 million, an increase of approximately $278,000 over 2026.
• Approximately 85% of general fund expenditures are personnel expenses.
• Revenue changes: county sales tax reduced by ~$500,000; city sales tax up ~$213,000; franchise fees up ~$1 million (following a review of agreements, some dating to the 1950s); charges for services down ~$345,000; property tax up 2.3%.
• Sales tax growth is projected at 1.4% over estimated 2026 collections, down from the ~3% typically projected.
• Building permit fee projections reduced by approximately $1 million, based on development services signals that large-scale development levels may be slowing.
• $740,000 transfer from the sales tax capital fund to the general fund (down ~$127,000 from 2026); the sales tax capital fund would still end 2027 with ~$1.9 million.
• Expense reductions: motor pool expenditures reduced by $1.6 million (charges now calculated based on equipment assigned to each department and fund); citywide travel reduced by ~$291,000 (individual travel requests will be evaluated in 2027 rather than pre-budgeted); Fayetteville Public Library contribution reduced by approximately $272,000 (the mayor described the cut as a 2.8% reduction in operating support, moving from $1.8 million to $1.5 million; the transcript notes both figures).
• Seven Hills funding is reduced in the general fund but fully offset by a contribution from the franchise fee fund, so total funding is unchanged.
• Estimated general fund ending balance: ~$36 million; available balance after the required 60-day reserve: ~$22 million.

Water & Sewer Fund

• Proposed budget of $63.9 million, an increase of ~$4.7 million.
• Increases are driven by the cost of water purchased from Beaver Water District; a new rate study adopted in 2026 is expected to hold for at least four more years.
• Repayment of the $85 million state revolving loan for the 48-inch water line begins in 2027: $2.6 million in principal and $272,000 in interest; the line is projected to be in service in late 2026 or early 2027.
• Capital expenditures of $9.7 million; CIP projections increased by $60 million over the 2026-2030 five-year span.
• $146 million in 2026 bond projects address Nolan wastewater plant repairs, a major 36-inch water line, and water storage tanks.
• Proposed staffing: 6 new positions; in-house work is significantly less costly than outside contracting, per repeated water and sewer committee discussions.
• Projected ending unrestricted fund balance: ~$23.9 million.
• West Side Treatment Plant study is planned for 2027, with results expected around 2028.

Other Funds

• Street fund: 69% state turnback and 21% county turnback funding; state turnback revenues reduced due to 2026 shortfalls; ORT and Razorback Transit contributions increased 25% over the adopted 2026 numbers, reaching nearly $1 million above the 2025 contribution; projected $338,000 loss; ending balance ~$8.7 million.
• Parking fund: downtown district (32%) and entertainment district (52%) parking revenues; projected small gain of ~$46,000; ending reserve of $2.2 million.
• Parks development fund: $6.1 million budget (+~$120,000); funded by half of the 2% hotel-motel-restaurant tax; 62% to parks maintenance, 22% to parks development capital; ending balance ~$5.7 million.
• Stormwater fund: $3.5 million budget ($851,000 operations, $1.1 million drainage maintenance, $1.5 million stormwater projects); $390,000 set aside in the CIP for bridge and drainage improvements; ending unrestricted net assets ~$1.2 million. The mayor asked about a prior $1.5 million city CIP contribution to stormwater; staff said the $390,000 is in the CIP and that they would double-check the $1.5 million figure.
• Recycling and trash fund: revenues ~$21.2 million; expenses ~$19.6 million; ~$1.6 million in capital expenditures and shop transfers; projected ending unrestricted balance of $4.3 million; a 2025 rate study is expected to hold for several more years.
• Airport fund: revenues of $5.3 million; fuel sales revenue down ~$327,000 and fuel costs down ~$288,000; ~$120,000 operating gain; ending fund balance ~$160,000; a business plan study is in its final phase, with results expected in late 2026 or early 2027; the city may need to use general fund dollars temporarily for grant matches.
• City shop fund: shop charges are ~93% of total revenues; budget increased $8.1 million over 2026; projected $6.6 million gain before capital expenditures; ~$12 million in vehicle/equipment replacements planned; projected $5.5 million budgetary loss; ending balance ~$20 million; fleet replacement reserve target lowered to 50% of total replacement cost (previous target was 100%, currently ~60% funded; the industry benchmark is roughly 25%).

Capital Improvement Plan (Sales Tax Capital Fund)

• $14.6 million in planned 2027 expenditures.
• Key changes: +$225,000 for airport terminal improvements; +$320,000 for citywide generator replacements; reduced 2027 fire apparatus purchases (now bond-funded); -$110,000 for library technology replacements; +$350,000 for the downtown master plan and UDC rewrite; +$500,000 for parking deck improvements; -$129,000 for parks and recreation improvements; reduced wireless traffic signal control contribution (partially bond-funded).
• Sales tax revenues up ~$146,000, offset by lower investment earnings.
• CIP increases over 2026: bridge and drainage +$150,000; facilities improvements +$117,000; fire improvements +$292,000; IT improvements +$130,000; other capital improvements +$689,000.
• Projected ending fund balance: ~$1.9 million.
• The CIP is updated every two years; council workshops will be scheduled around the second quarter of 2027 to discuss the next CIP update.

Council Discussion & Follow-ups

• Library funding: The reduction is a 2.8% cut to operating support, not the 15% scenario figure that was reported publicly; library capital funding is intact, including $500,000 for books. Library Executive Director David Johnson indicated the one-year reduction can be absorbed without cutting public services, programming, or staff. The library contribution now sits in the mayor's office budget so it has an accountable owner; an annual library report will be scheduled for the first quarter of 2027.
• Community access television funding was put out for RFP; Your Media was the respondent, and the contract will return to council for approval.
• Outside agency funding was reorganized from general administration into department budgets, with a named department champion for each entity (e.g., Central EMS under police; Boys and Girls Club under parks and recreation).
• Fleet: Council questioned the new 50% replacement reserve target and the fuel price assumptions; staff explained rising vehicle costs and that fleet charges will be recalculated per assigned equipment, with a true citywide motor pool under development.
• TIF debt: ~$6 million in accreted value plus ~$3 million in principal remains outstanding; payoff will continue for quite a few years; staff will provide an update at the next agenda session.
• Planning: The downtown master plan and UDC rewrite will move forward in tandem, with outside consultants selected via an RFP/RFQ process; two open planning positions remain unfilled; planning leadership has cleared most of the development backlog.
• Parking: Council asked whether new parking districts (e.g., Garland/Leverett area neighborhoods) should be considered for 2027; staff responded that a new district would carry its own budget and is not part of the 2027 budget process, with follow-up planned for the agenda session.
• Delinquent county taxes: Council asked whether delinquency data could flag households in distress, such as affordable housing owners at risk of losing their homes; staff noted current data is aggregate-only; the mayor suggested exploring the assessor's public records and incorporating the data point into the tenant toolkit work.
• Investment earnings: Budgeted under $1 million for 2027 (down from $1.5 million in 2025 and $1.2 million adopted for 2026) due to a weaker economic outlook; a fluctuating general fund revenue line item and the Area Agency on Aging/Senior Center funding breakdown were deferred to the November 10 agenda session.
• One council member with development industry experience validated the reduced building permit projections, citing saturation of off-campus student housing and few large office projects expected; 2027 is the third year of the development services fee increases.

Key Outcomes

• No formal votes were taken; this was an informal budget review session.
• The 2027 budget will be presented again at the November 10 agenda session and considered for adoption at the November 17 City Council meeting.
• Staff will prepare follow-up materials: Senior Center/Area Agency on Aging funding breakdown, TIF debt update, detail on the fluctuating general fund revenue line, parking district feasibility discussion, and scheduling of the library's annual report.
• The city committed to continuing the departmental 15%-reduction planning exercise with more standardized templates in future years.
• Council will receive the presentation slides electronically following the meeting.