San Antonio City Council FY2026 Budget Briefing and Five-Year Forecast – May 6, 2026

The San Antonio City Council held a B session on Wednesday, May 6, 2026, at 2:03 PM to receive a briefing on the FY2026 second-quarter financial status, the five-year financial forecast for the General Fund and major restricted funds, and an update on the budget process. The presentation, led by Interim Budget Director Freddy Martinez and City Manager Eric, highlighted a structurally unbalance forecast with deficits starting in FY2028, driven by slowing revenue growth and rising expenses, particularly in employee compensation and healthcare. Council members debated whether to pursue deep spending cuts (scenario one) or a combination of a property tax rate increase (to the state allowed 3.5% growth) and targeted reductions (scenario two). No decisions were made; next steps include the mid-year budget adjustment and taxpayer impact statement on May 14, a goal-setting session on May 22, and the trial budget on June 17.

Discussion Items

• FY2026 Second Quarter Financial Status:

  • General Fund revenues are $21.5 million above budget through six months, projected to end the year $50.9 million above budget due to higher CPS Energy payments (off-system sales). Sales tax growth is slower than budgeted (2.6% below). Property tax is slightly above budget.
  • Employee Benefits Fund is over budget by $19.4 million in Q2, projected to be $45.4 million over for FY26, driven by medical/pharmacy claims—especially from freestanding emergency rooms. The city is targeting education and provider negotiations.

• Five-Year General Fund Forecast (FY27‑FY31):

  • Revenues projected to decline 0.6% in FY27 (versus FY26 estimate) and grow modestly thereafter, while expenses grow at 6.3% in FY27 and 3.8% on average in outer years.
  • Under current property tax rate (54.159 cents per $100), the deficit reaches $130 million in FY28 and grows to $264 million by FY31. If the city raises the tax rate to the state allowed 3.5% revenue growth, the deficit reduces to $70.3 million in FY28 and $196 million in FY31.
  • Property tax base values are projected to decline 2.13% in FY27—the first negative growth since 2011—primarily due to housing market conditions, high protests/exemptions, and SB9 (business personal property exemption).

• Restricted Fund Forecasts:

  • Hotel Occupancy Tax: structurally balanced in FY27 but small deficits in outer years (growing to $3.1 million by FY31).
  • Development Services Fund: structurally unbalanced due to declining permit activity (residential permits down 23.5% in FY26, commercial down 9.9%). No fee increases since 2008. Deficit of $6.4 million in FY27, growing to $17.6 million by FY31. Staff is discussing targeted fee adjustments with stakeholders.
  • Solid Waste Management Fund: Assumes annual fee increases of $0.50-$1.00 per cart and environmental fee increases to maintain structural balance and a 5% reserve.

• Comprehensive Budget Reviews:

  • Reviews underway for Police, Fire, Library, Municipal Court, and HR departments. 13 of 23 identified areas expected to be completed by end of FY26; results will be incorporated into the FY27 proposed budget.

• Medicaid 1115 Waiver:

  • A deep dive identified additional reserves that allow certain 1115 waiver programs (e.g., oral health, violence prevention) to continue without general fund support. A final recommendation will be part of the FY27 proposed budget.

• Council Member Positions & Debate:

  • Several members (Gavito, White, Spears) argued the city has a spending problem and should pursue deep cuts (scenario one) before any tax increase. They emphasized core services under city charter, state/federal law, and voter-approved bond projects.
  • Other members (McKee Rodriguez, Galvan, Viagran, Corps, Castillo) highlighted that significant cuts would harm vulnerable populations and that a revenue increase is necessary to maintain quality of life services (parks, libraries, health, sidewalks). They pointed out that the city’s budget is 70% personnel and that cutting $130 million would require layoffs or eliminating non-core departments entirely.
  • Mayor and City Manager noted the two-year budget cycle provides some flexibility but warned that structural deficits require action. The recommended path (scenario two) combines using the state allowed property tax revenue growth (generating ~$24.7 million in FY27 and $42 million in FY28) with ~$70 million in expenditure reductions over two years.

Key Outcomes

• Next Budget Dates:

  • May 14, 2026: City Council will consider the FY26 mid-year budget adjustment and adopt the taxpayer impact statement (showing average property tax bill and key fees).
  • May 22, 2026: Goal-setting session at the convention center to discuss community budget survey results and council priorities.
  • June 17, 2026: Trial budget presentation with updated revenue assumptions and proposed targeted reductions.
  • August 13, 2026: Proposed FY27 budget presented to Council.
  • September 17, 2026: Final budget adoption.

• No Formal Decision on Tax Rate or Cuts: Council members expressed support for either scenario one (cuts only) or scenario two (tax rate increase plus cuts), with no consensus reached. The debate will continue through the goal-setting and trial budget sessions.

• Additional Requests from Council:

  • Provide a detailed breakdown of property value declines (residential, commercial, industrial).
  • Present a clear list of core vs. non-core services as defined by charter/state law.
  • Explore revenue enhancements (e.g., increasing fines for vacant properties, short-term rental fees, auto recycler fees, and collecting outstanding debts).
  • Examine subsidies and TIRZ agreements for potential savings.
  • Investigate cross-jurisdictional collaboration with Bear County and other municipalities.

• No Public Comment Heard: The meeting adjourned at 4:34 PM, with public comment scheduled for later but not conducted during this session.