2025/2026 Budget Draft Discussion

[Shane Saum]

Colleagues,

Thank you to Council Prince who sent over his preliminary notes on the Budget. I will add his comments below. Attached are my initial questions back to Charles and staff on individual line items and the exceptional items that we have received. I can share the spreadsheet with you if you would like to use a similar format and I will send the spreadsheet to Charles for staff to provide their notes. I had to turn it into PDF form to attached it here.

As we continue reviewing the FY 2025–2026 proposed budget, I want to reiterate what I believe should be our guiding principle: we are close enough to the Voter Approval Rate (VAR) that we should be aiming to hold the current tax rate or reduce it—not increase it. The revenue difference is around $130,000. I believe we can find that and more through common-sense reductions.

Here are several areas I’m closely analyzing for potential savings:

Bank and Credit Card Fees​

• We’re spending over $160,000 in bank fees and an additional $250,000+ in credit card processing fees across multiple funds.
• We should explore if we can negotiate with our bank to consolidate sub-fund accounts under the broader City umbrella and seek fee waivers.
• We should explore reducing credit card fees—many cities encourage low-cost ACH transactions.

Personnel Budgeting Overages​

• Several departments appear to be consistently overbudgeting personnel costs when compared to actuals from prior years.
• I’ve flagged examples where the difference adds up to six figures in potential savings if we budget more accurately.
• Councilor Paul Prince has noted this trend for years at the Golf Course, especially around P&B line items.

Overlapping or Excessive Maintenance Lines​

• In several departments, I’m seeing large increases to repair and maintenance budgets, followed by an additional line for ‘unanticipated’ maintenance.
• If we’re already building in a sizable cushion in the base budget, why are we layering in more for “unexpected” expenses? Let’s be disciplined here.
• I think some of this increases in Maintenance and Repairs need to be better justified.

IT Costs and Shared Services​

• If we transition away from city-owned servers and hardware, what savings can we realize by using the State DIR shared cloud services?
• Let’s be sure we’re actually reducing costs and not simply layering new contracts over old infrastructure.

Nonprofit Grants Program​

• This program has grown significantly, and while many of these organizations do great work, we need to ask: Is this something the City would otherwise provide as a public service?
• I spoke to another City who said they have not heard of a nonprofit grants program like ours.
• If not, it’s hard to justify taxpayer funding. These groups are worthy of support—but that support should come from individuals and donors, not the property tax base.

Exceptional Items​

• I’ve asked staff to provide multiple bids for large exceptional item requests to ensure we’re getting the best deal.
• I also want to know whether MOUs or interlocal agreements (ILAs) with the County or State were considered before pursuing new City expenditures—especially for equipment or one-time capital costs.

Let’s sharpen our pencils and send a message to our citizens that we are fiscally responsible and capable of delivering quality services without raising taxes.

I welcome any additional feedback from Council or staff on areas we may still be overbudgeting. I also acknowledge this was a first draft budget and it is significantly better than what we got last year. Thank you to Charles and staff for starting us off so well!

Here is what Councilor Prince provided:

Overall, I think this is a good starting point. Plenty of pencil sharpening to be done of course. Looking forward to having the excel file to do that. I also went through the Tax calculations sheets carefully and understand why the VAR rate is lower than the NNR. I believe our choices are to go with VAR (0.428355) or stick with this years rate (0.4231). I personally lean towards going with the VAR rate but am open to discuss this further as the budget details sharpen up. It's ~$130K different in revenue so it may not be worth the political pain to change it.
Major comments:

1. From the Consolidated statement P. 4 (summary table)
   1. Revenue for GenF includes $3.6M xfer from UF. I think it should be ~$11.6M (not $15.2M)
      1. Expense for UtilF does NOT include xfer to GF. This is correct.
2. From GF Revenue... assuming $6M for AdV tax is low. I believe the VAR amount is $6.326M (line 21 [TAV] * line 41 [VAR M&O])
   1. Even if we keep the same tax rate as last year this will be $6.195M
3. LVGC... Total Exp $1,502,477, Revenue $910,700 [$592K loss]
   1. Expense budget is way too high again. I've pointed this out for 2 years running. Actual expenses last year and the trend for this year is $1.25M. The Budgeted amount is about $250K above what will actually be spent based on last 3 years history. The largest driver is P&B which has consistently been under budget by a large amount. I'm expecting $1.25M expense here.
   2. Revenue this year is trending to ~$900K. We've had over 30% revenue growth per year the last two years (thank you Greg). Assuming similar revenue growth again, a target of $1.2M is appropriate.
4. ...NOTE: This is consistent with Greg's ongoing message to GCAC that assuming the irrigation gets done he believes he has a shot at near break-even.
5. After transfer to the GenF, the UtilF will roughly lose ~$2M (as expected). We may be able to transfer significantly less.
   1. $326K upside on M&O AdV [#2]
   2. $550K upside on LVGC [#3]

Paul

 

[Charles West]

Responses to questions about budget.

 

[Shane Saum]

Dear Colleagues,

We are currently looking at a proposed tax rate of $0.42 per $100. I want to open discussion that we can responsibly go lower. Each cent matters for our citizens, but has only a marginal impact on our surplus which the current budget is showing a surplus of more than $4M. This is an opportunity to both provide relief and align with the Government Finance Officers Association (GFOA) best practices, which caution against accumulating excess reserves without a purpose.

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Options: What Each Penny Means​

• Each 1¢ on the tax rate = about $249,000 in levy on our 2025 TNT taxable base.
• So the difference between 42¢ and 40¢ is ≈ $500,000.
• Going further:
  
  • 42¢ → break-even ≈ $349,000 taxable (fewer homeowners see relief).
  • 40¢ → break-even ≈ $366,000 taxable (~70–75% of homesteads see a decrease).
  • 38¢ → break-even ≈ $386,000 taxable (closer to ~80–85% of homesteads).
  • 36¢ → break-even ≈ $407,000 taxable. (85% - 90%)
  • 34¢ → break-even ≈ $431,000 taxable (~90% of homesteads benefit).

As the rate drops, more and more homeowners see a decrease compared to last year.

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GFOA Best Practices — and Where Lago Stands​

• Fund Balance Guidelines for the General Fund: GFOA recommends maintaining at least two months of regular general fund operating revenues or expenditures (~16–17%) and formally adopting a policy for the use of any excess. Accumulating reserves without a plan is not best practice. GFOA: Fund Balance Guidelines
• Structurally Balanced Budget: GFOA advises that recurring revenues match recurring expenses and that reserve growth should not substitute for planning. GFOA: Achieving a Structurally Balanced Budget
• Enterprise Funds (Utilities): GFOA further recommends working capital targets be set, not simply stockpiling reserves. GFOA: Working Capital Targets for Enterprise Funds

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Our Current Reserves​

• General Fund Total Expenditures (FY 25–26): ≈ $12.98M
• General Fund Ending Balance: ≈ $19.3M (≈ 15+ months of expenses, nearly 10× GFOA’s two-month guidance).
• Utility Fund Total Expenditures: ≈ $8.75M
• Utility Fund Ending Balance: ≈ $16.2M (≈ 22 months of expenses).

Combined, Lago Vista is sitting on ~$35M in reserves, far beyond the minimum standards. Why should we continue to grow our reserves with no plan on how to spend them while our citizens watch their property taxes in Travis county grow and grow.

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Why Not Just “Bank” More Surplus?​

• In 2024, the City celebrated a GFOA award. Sticking with their standards means not building unplanned surpluses.
• We are not self-funding major infrastructure. For our water projects, we have stated we are seeking state and federal dollars and then most likely bonds. Whether we issue a bond for $50 million or $60 million, the payoff schedule changes very little, but the difference between a 40¢ and 42¢ tax rate makes a real impact for our taxpayers today.
• Travis County and Central Health have both increased taxes this year. Our citizens will already see higher bills overall. Lago Vista has the opportunity to offset those increases locally.

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Path Forward​

I believe we owe it to our citizens to explore going below 42¢—whether it’s 40¢, 38¢, 36¢, or even 34¢.

• At 34¢, nearly 90% of Lago Vista homesteads would see a tax cut compared to last year.
• Even at those lower levels, we remain well within GFOA best practices, with surpluses and reserves far above recommended thresholds.

I look forward to your thoughts on how we can deliver tax relief, stay true to GFOA standards, and manage our finances responsibly without building reserves for the sake of reserves.

 

[Paul Prince]

Reducing tax rates dramatically now would be premature and not fiscally justified given our current and projected situation.

I want to remind all council members that in our council discussions starting way back in February, we agreed to focus on dealing with our back log of dated infrastructure without increasing the tax rate for citizens. Councilor Owen in particular presented a well thought out 10 year view of the City's financial position and upcoming Capital improvement needs. She showed that although we do have a significant amount of reserves on hand now, we will be burning through it over the coming years. As I recall she assumed that with a flat tax rate and modest growth in population we would be just on the edge of affording to do what city staff, and the master plans we have paid for, tell us we need. So, I first want to say that these reserves absolutely have a planned use and are not a surprise.

There have been many discussions of possible grants and whether we can do some delays or reduction in scope to the master plans. These would help and I welcome the savings to our citizens. But none of these are confirmed. We have received zero grant dollars for water or wastewater to date! When we do receive significant grant dollars and/or are presented with plans by staff that are a significantly lower investment amount over the next 10 years, (assuming council agrees and approves these new plans), then I would whole heartedly support tax reductions (and/or reductions in utility rates).

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Now... let me go on to some specific comments about the updated budget which was distributed to council yesterday...

• Utility Fund revenue total revenue will be lower than shown by $2.37M ($15,708,925)has a double entry for bond money (450-7911 2,370,000 & 480-1100 2,370,000)
  • AND, I cannot find a balancing expense for this bond revenue. If we're transferring money in we should be spending it on a project somewhere, otherwise don't transfer the money in.
  • For streets and GC Irrigation the bond dollars go straight into the CIP Fund. Why not do that here? If the Bond money does not come in here at all then Revenue is $13,338K on expenses of $18,335K (unless some of those expenses also belong in CIP)
  • NET: Projected Fund balance will go down, not up... maybe by a lot
• Golf Course
  • Expense still looks ~$200K higher than appropriate to me based on historical actual spend. If I'm right, the transfer from GF S/B ~$250K, not $450K. The GC expense to the General Fund is getting in the range of what we spend ion the library and the city pool. With the effluent distribution and irrigation project going in this coming year it should get to a net positive contribution to the city the following year, a HUGE improvement.
• Airport.
  • Based on expense and revenue shown (which seem reasonable) it looks like the transfer from GF S/B ~$20K, not $100K.
• General Fund
  • AdValorem may be higher than $6M by $200K +/- per notes I've previously sent (pending setting tax rate of course).
  • Transfer from Utility Fund can/should be reduced to ~$3M vs $3.6M currently shown.
  • PD has added expense for an additional SRO but the Funding from LVISD for their portion did not increase (420-1230 should go up by ~$50K)
  • PD has added expense for "COPs grant position" but I can't find any associated Grant money in revenue
  • Increased expenses are shown in Parks as we have agreed by consensus but no capturing of use of tree funds as offset since there is no actual "Tree fund", but the money is tracked by staff and shown in the financial reports in the general fund. How can we capture the balance and use of Tree fund money in this budget associated with spending in Parks?
  • NET: Projected General Fund balance after all these adjustments is probably about flat.

Shane has proposed that perhaps we should further reduce the tax rate to use some of this reserve. Norma has shown in her 10 year analysis we're going to burn through reserves as we actually do CIP projects. Charles has suggested perhaps we can delay some of the spending, but I'm not sure we know yet. That is a fundamental question (use reserves now on a big tax reduction or hold for later) we should continue to analyze. Certainly the state tax laws coming in say if we reduce we will not be able to go back up, so I'd want to be very sure it's the right long term move.

 

[Norma Owen]

Thank you, Paul, for highlighting the serious situation we are facing in the near future. I will share the revised projections for the next 10 years shortly. Currently, the CIP spreadsheet shows $61 million funded by "other" sources, as the specific funding has not yet been identified. The latest projections indicate an increase of at least $10 million through 2029, which is only four years away, not ten.

I would like to propose that we keep taxes flat for now, and consider a possible reduction only if grants are received. I believe I heard Councilor Benefield mention this idea. A potential tax reduction after receiving grants could be timely in a future year, especially if inflation continues to rise.

Councilor Saum, I applaud your efforts to take care of our citizens. I support your initiatives to save them money and your advocacy for grants to meet our immediate infrastructure needs. However, I believe we should adopt a conservative approach during this time to ensure we can manage cash flow for the CIP—referred to as pay-go—until the grants are awarded and received.

Noted earlier in this thread:

• We are not self-funding major infrastructure. For our water projects, we have stated we are seeking state and federal dollars and then most likely bonds. Whether we issue a bond for $50 million or $60 million, the payoff schedule changes very little, but the difference between a 40¢ and 42¢ tax rate makes a real impact for our taxpayers today.

My assessment, which was validated earlier this year by our bonding agent, indicates that we currently have a cap of $40 million in bond issuance. This still leaves us with a gap of $20 million to meet our needs unless our repair costs turn out to be less extensive than initially indicated or we receive more than $20 million in grants.

At this time, I propose that we maintain flexibility until the final vote on the tax rate. This approach will allow us more time to evaluate our actual circumstances. If we can gain more certainty regarding the cost of repairs or the likelihood of receiving grants, I will fully support a tax cut for our residents.

Ultimately, I believe our citizens would prefer to have reliable water and wastewater services over a tax cut at this moment. Keeping our capacity at the current rate seems prudent until we receive further information that suggests a different course of action.

 

[Paul Prince]

Council,
The Finance Sub-Committee (Owen, Saum, Prince) held a meeting with staff following our last Council session and identified a few significant adjustments/corrections we believe need to made to the budget. Staff has made these changes and resubmitted a budget file to council today. These changes are:
1. Roadway Impact Fees were incorrectly placed in the GF Revenue, these have now been moved to the correct location in the Impact Fee Fund. This was a significant amount of $590K in projected revenue from these fees. This change leads to change #2
2. Council had previously agreed by consensus to set the Utility Fund to General Fund transfer at $1.0M as needed to balance the GF budget. With item #1 this transfer will need to increase to $1.6M. I will note that this is still a significant reduction from last years transfer of $3.6M
3. We identified a line item for a position in Public Works which will not be filled (Assistant Director PW) and that budgeted salary has been removed.

Finally, I have spent significant time creating a document with text and graphs that is intended to be a potential introduction and overview for this years budget. I believe that it should be helpful for citizens to better understand the big picture of the cities budget. I welcome your feedback.

It opens with the following text:

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This year’s budget consists of balanced Revenue and Expenses in the General fund of $12.8M and in the Utility Fund of $18.5M. These numbers include a $1.6M transfer from the Utility Fund (expense) to the General Fund (revenue). The Utility Fund budget also includes $9.56M in Capital Project spending. Thus, excluding Transfers and Project expenses, the operating expenses are: $12.4M General Fund and $7.4M Utility Fund

The Airport Fund and Golf Fund will receive transfers from the General Fund of $50,000 and $350,000 respectively in order to balance expenses.

The Capital Improvement Fund has expenses of $9.5M ($4M street rehab, $5.5M Effluent GC Irrigation), with all revenue coming from the 2024 Bond.

Debt Service of $4.3M is paid by the I&S portion of Property Taxes.

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The full document can be found here: 2025-26 Budget Commentary - Paul.docx

 

[Adam Benefield]

Council,
The Finance Sub-Committee (Owen, Saum, Prince) held a meeting with staff following our last Council session and identified a few significant adjustments/corrections we believe need to made to the budget. Staff has made these changes and resubmitted a budget file to council today. These changes are:
1. Roadway Impact Fees were incorrectly placed in the GF Revenue, these have now been moved to the correct location in the Impact Fee Fund. This was a significant amount of $590K in projected revenue from these fees. This change leads to change #2
2. Council had previously agreed by consensus to set the Utility Fund to General Fund transfer at $1.0M as needed to balance the GF budget. With item #1 this transfer will need to increase to $1.6M. I will note that this is still a significant reduction from last years transfer of $3.6M
3. We identified a line item for a position in Public Works which will not be filled (Assistant Director PW) and that budgeted salary has been removed.

Finally, I have spent significant time creating a document with text and graphs that is intended to be a potential introduction and overview for this years budget. I believe that it should be helpful for citizens to better understand the big picture of the cities budget. I welcome your feedback.

It opens with the following text:

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This year’s budget consists of balanced Revenue and Expenses in the General fund of $12.8M and in the Utility Fund of $18.5M. These numbers include a $1.6M transfer from the Utility Fund (expense) to the General Fund (revenue). The Utility Fund budget also includes $9.56M in Capital Project spending. Thus, excluding Transfers and Project expenses, the operating expenses are: $12.4M General Fund and $7.4M Utility Fund

The Airport Fund and Golf Fund will receive transfers from the General Fund of $50,000 and $350,000 respectively in order to balance expenses.

The Capital Improvement Fund has expenses of $9.5M ($4M street rehab, $5.5M Effluent GC Irrigation), with all revenue coming from the 2024 Bond.

Debt Service of $4.3M is paid by the I&S portion of Property Taxes.

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The full document can be found here: 2025-26 Budget Commentary - Paul.docx

Mr. Prince,

Thank you for the update and for the time you and the Finance Sub-Committee have put into this. I do have a couple of questions:

1. With the utility fund transfer now proposed at $1.6M (and considering last year’s $3.6M), how long can the utility fund sustain this level of annual transfers before reserve balances are depleted?
2. Is the budget considered “balanced” if it requires ongoing transfers from reserves to close the gap in the General Fund?

Respectfully,
Adam C. Benefield