The big picture
City of San Marcos Director of Finance Jonathan Locke provided a budget presentation during the June 26 workshop that included updates on staffing strategies, the city's tax rate and its capital improvement program.
In his presentation, Locke said the city's two largest sources of revenue are both projected to decrease for the upcoming fiscal year and are not keeping up with the cost of operations. The presentation can be viewed on the city's website.
Sales tax revenues for the 2026 fiscal year are projected to be lower than in 2023, and a decline in property values in San Marcos could leave the city with a $3.1 million shortfall.
The details
To balance its budget without making $3.1 million in reductions, Locke said city officials could opt for a $0.6403 increase to its tax rate. This is slightly lower than the no-new-revenue tax rate, which would raise the same amount of property tax revenue for the city as the previous fiscal year, which would necessitate a $0.6496 increase to the city's property tax rate of $0.6030 per $100 of valuation.
What they're saying
With a $40,000 proposed increase to the homestead exemption heading to voters in November, Locke said the city is at a fork in the road.
"We have a decision to make and we're at a fork in the road," Locke said. "For the first time, maintaining the current tax rate will result in a structurally unbalanced balance budget and will require adjustments to be made to either increase revenues or decrease expenses."
The impact of $3.1 million in cuts to the city's budget, he said, would likely be reductions to personnel.
"That is a very large budget cut for the general fund," Locke said. "72% of the general fund is personnel. It's people. It takes people to provide the types of services that the general fund provides."
What's next?
Council members leaned toward choosing the higher no-new-revenue rate, to support city services and operations, including tenant's rights assistance and the new Office of Community Support & Resources.
Locke said a budget and tax rate proposal incorporating this feedback will be brought to Council in August. City staff will pursue community engagement about the budget in the coming months, ahead of a vote on its approval in September.
