Kearney City Council Budget Retreat - May 14, 2025

The Kearney City Council held a budget retreat on May 14, 2025, at 5:30 p.m. in the City Council Chambers. The meeting was devoted entirely to a presentation and discussion of the City of Kearney budget led by City Manager Brenda Jensen. Topics included the budget process, state legislative impacts, revenue and expenditure trends, the proposed Fire Station #3 project, and a wide-ranging list of future capital projects. No formal votes were taken; the meeting served as an informational session and a starting point for future budget deliberations.

Discussion Items

• Budget Process & Timeline: Jensen outlined the fiscal year (October 1 start) and key dates: March special sales tax public hearing, May retreat (newer addition), July joint city-county meeting and full budget retreat, September public hearings and adoption. For FY26, the council will first see the full budget in July.
• State Influences on Budget:
  • Property Tax Cap: LB34 (2024) imposed a new formula; LB647 (2025) made tweaks, including removing the previous lid on restricted funds and eliminating the occupation tax cap (allowing rate increases without voter approval). The SLICE (State and Local Government Expenditures) index for this year is 5.17%, plus growth (typically 2-3%).
  • State Reimbursements: The Nebraska Advantage Program will cost the city ~$230,000 in lost sales tax revenue next year (unknown recipients). State Highway 30 projects require city cost-sharing: 50% for maintenance, 20% for reconstruction, 10% for safety. Upcoming: $293,000 for streetlight replacement on East Highway 30 (FY26); $4 million estimated for reconstruction from college curves to 30th Avenue (FY27).
  • Mandated Pension Increases: Police pension match rises from 7% to 9% (city cost $124,000); firefighter hybrid program increase ~$35,000. Combined with Nebraska Advantage, known cost increases total $390,000 for FY26.
• Revenue & Expenditure Trends (General Fund):
  • Revenues: Over five years, total revenue increased 43% (~$5 million); sales tax grew 49% ($3.9 million), property tax grew 30% ($1.15 million). Property tax currently brings in ~$5 million (does not cover police salaries/benefits of $8.4 million). Sales tax (1% general fund, 0.5% capital) is the largest revenue source.
  • Expenditures: 61% ($22.7M) on personal services, 35% ($13.1M) on operating, 4% ($1.4M) on capital outlay. Over five years, operating (non-restricted) costs grew 72% ($5.8M); personnel/insurance (restricted) grew 28% ($4.9M). Property and casualty insurance rose 135% ($370,000) over five years. Examples of cost escalations: pool chemicals up $20,000; water meters doubled from 2023-2025; fire helmet up 73% (to $570), bunker boots up 157% (to $572).
• New Services:
  • Yanni Gardens: Operating costs ~$800,000 (parks only, not senior center/rec/marina). Endowment is being built but not yet sufficient to cover operations.
  • Sportsplex: FY25 operating cost $1.1 million (partial year); FY26 full-year estimate $1.6 million. Revenues plus $300,000 from Visitors Bureau and $450,000 subsidy from Keno funds projected to break even. Council discussed potential future funding strategies: increasing hotel/restaurant occupation tax (now no voter cap) or allocating more Visitor Bureau funds.
• Fire Station #3 & Ladder Truck:
  • Need: Response times to northeast Kearney are poor; ISO rating is within one point of dropping from Class 2 to Class 3 (would raise insurance rates). Station would be at Avenue N and 48th Street. The airport station (currently used as a temporary fix) is often unavailable due to FAA mandates. Total project cost: $14.815 million ($12.3M station, $2.5M ladder truck).
  • Funding: Proposed municipal improvement bond (first use of this tool) with 20-year term, pledging property and sales tax. Estimated annual payment $1.1 million, requiring a 3-cent levy increase (from ~14¢ to ~17¢). Average home value ($234,000) would see an annual increase of ~$70 ($5.83/month). Council members expressed support for the need but raised concerns about cumulative property tax burden alongside other potential bonds (law enforcement center, schools). Discussion included alternative funding (e.g., half-cent sales tax, but that requires a public vote and 10-year limit).
• Future Capital Projects List:
  • Roadway/Intersections:
    • 39th & Antelope: $6.4 million for three-lane road and roundabout (needed due to major annexations/development; city pays full cost).
    • Talmadge & 2nd Avenue: Traffic impact study underway; no cost estimates yet.
    • West Interchange (30th Avenue): Sub-projects total ~$14.6 million (widening, paving) before interchange itself; long-term priority.
  • Bridges/Drainage:
    • Bridge replacement (box culvert): cost unknown.
    • Downtown drainage (twin 60-inch pipes under railroad): $7 million, in design phase.
    • Southeast drainage (Avenue M to river): Phase 1 $6 million, Phase 2 $8 million.
  • Water/Sanitary Sewer:
    • N Avenue water tower loop $1.1M; Highway 30 water loop $410K; M Avenue loop $1.2M.
    • Chase Avenue trunk sewer (relieves Antelope line at 90% capacity): partially funded by $3.3M EDA grant.
  • City Facilities:
    • Sportsplex overflow parking: paved option $1.5M (340 stalls); gravel option $625K (fewer stalls, winter issues). Council favored paved.
    • New vehicle maintenance building: cost unknown; exploring options including potential relocation of public works.
  • Beautification/Parks:
    • 2nd Avenue entrance sign ($75K+ for full beautification).
    • Cottonmill Park improvements (swim lake, nature barn): cost unknown; discussion on repurposing.
    • East Dog Park (14 acres): $275,000.
    • Dryden Park softball field improvements ($1.4M, potential donor through UNK).
    • Pickleball expansion at Harvey Park ($350,000 for 4 courts).
    • Additional MRG flight to Chicago: estimated $1.5-$1.8 million per year (subsidy needed; previous cost was $1.2M in 2019). Council noted high public interest.
• Prioritization: The special sales tax (0.5%) generates ~$6M annually for capital, but current encumbrances leave only ~$2M per year available for new projects. Jensen emphasized the need for council direction on priorities and funding strategies.

Key Outcomes

• No formal motions or votes were taken.
• Council members acknowledged the need for Fire Station #3 and a ladder truck but expressed caution about property tax increases and the cumulative impact on taxpayers.
• The council directed staff to provide a detailed special sales tax spending timeline (when current commitments expire) to aid in planning.
• Staff will continue developing a prioritized capital plan and explore funding options (bonds, sales tax, occupation tax, grants) for future council consideration.
• The budget retreat will be followed by the July budget retreat where FY26 numbers will be presented in full.