Watauga City Council Budget Workshop Meeting - June 1, 2026

The Watauga City Council held a workshop meeting on Monday, June 1, 2026, at 6:36 PM in City Hall Council Chambers to discuss the 2026-2027 fiscal year budget. Staff presented an overview of the budget calendar, revenue and expenditure challenges, facility repair needs, and long-term financial strategies. No public comments were made. The meeting adjourned at 7:20 PM.

Discussion Items

• Budget Calendar and Priorities: Staff highlighted the compressed timeline due to pursuing the de minimis tax rate, targeting budget adoption by August 24, 2026. Key challenges included recruitment and retention, inflation, insufficient revenue growth to meet rising expenditures, facility and infrastructure obligations, and legislative uncertainty (e.g., possible changes to development fees and property taxes).
• Revenue Projections: May estimates showed a 0.8% increase in appraised values and $16 million in new construction growth (down from $20 million the prior year). The new business personal property tax exemption (increased from $2,500 to $125,000 per business) is expected to cost the city approximately $125,000 in revenue annually.
• Expense Pressures: Health insurance premium increases were initially estimated at 25% by the broker, but staff budgeted 15% (estimated $117,000 impact on the general fund). Shared services costs increased by $93,000 due to higher call volume and usage. Electricity and utility inflation included a 28% increase in street light fees (negotiated down from a 53% request) and a 3% increase on non-street light usage. Property and liability insurance figures were not yet available.
• Compensation Study: A compensation study found that civil service positions are behind the market, with a few general government positions also lagging. Further discussion and recommendations will be presented at the June 22, 2025 meeting.
• Facility Repair Needs: Staff presented prioritized immediate repairs for three city facilities, all to be funded from fund balance:
  • Police facility: $166,000 (concrete bollards $6,000, LED conversion $3,700, parking lot security fencing $55,000, parking gate system $65,000, and connex ammo storage for humidity issues).
  • Animal shelter: Staff initially detailed $412,000 in repairs (perimeter fencing $3,300, security cameras, parking lot lighting $8,500, generator $48,000, HVAC/ventilation upgrade $250,000, synthetic turf $98,000) but later summarized the animal shelter as approximately $111,000. The discrepancy was not resolved during the meeting.
  • Library: Up to $280,000 depending on choices (entryway doors $55,000 or front door access repair $6,700; ADA accessible restrooms $120,000 or door repair $700; space utilization study $19,000; west window covering $11,000; power source updates $30,000; sidewalk and parking lot repairs $45,000 plus 5-10% contingency, plus asphalt repair estimate pending).
• Fund Balance and Debt Strategy: The estimated October 1, 2026 fund balance is $8.9 million (45% of operating expenditures, well above the 20% policy minimum). To avoid issuing debt in 2026, staff proposed a cash defeasance of callable debt to save $111,000 over five years and free up debt capacity. A possible 2027 bond election could fund the animal shelter for $10 million, with police and library bonds potentially coming in 2029 or 2031. If voters approve, fund balance could be used to pay down debt early and keep tax rates lower.
• Five-Year Capital Plans: The five-year capital outlay plan for fiscal year 2026-2027 totals $1.35 million across general fund, water/sewer, and storm drain funds. The capital improvement plan for FY 2027 totals $5.7 million, mostly water and sewer projects. Staff noted that projects were shifted to allow forgoing debt this year.
• Personnel and Supplemental Requests: Departments requested new positions (library upgrades, PD intelligence data analyst, public works position) and supplemental budget items, but staff indicated these are unlikely to fit within current pressures. Total one-time general fund requests are $1.6 million, plus ongoing costs.
• Cost Recovery and Efficiencies: Staff is analyzing merchant service fees (currently $120,000/year), considering a 3.5% pass-through to credit card users, evaluating facility fees, and leveraging technology (e.g., AMI eliminated one utility billing position). All positions are justified, and cost-saving measures are monitored.

Key Outcomes

• No formal votes were taken; the workshop was informational.
• The council received the budget presentation and discussed facility repairs, debt strategy, and operational challenges.
• The next budget work session, including compensation study details by Julie, is scheduled for June 22, 2026.
• Staff will continue to refine the budget and will present the crime control district budget for council acceptance on June 8, 2026.
• The council acknowledged the need to monitor legislative impacts and consider a potential 2027 bond election for the animal shelter.