Lakeway City Council approved the fiscal year 2026-2027 budget and property tax rate in a 4-3 vote at a Sept. 21 council meeting.
The overview
In June, the city announced it is projected to have a $1.6 million shortfall, with revenues down by nearly 5.5% and a 6% increase in expenditures, including a more than 50% decrease in building and development revenue, from fiscal year 2026 to fiscal year 2027.
To resolve the shortfall, city staff recommended that council adopt the de minimis tax rate, a special tax rate designed to give cities with a population of less than 30,000 the option to adopt a tax rate that generates $500,000 more in property tax revenue than the previous year without triggering the voter-approval rate.
“We need to think about the long-term …” Lakeway Mayor Thomas Kilgore said. “My goal would never be to leave the future City Council with a $5-10 million bond.”
Yet, City Council approved the lesser no-new-revenue maintenance and operations rate, with Kilgore and Council Member Wes Hook voting against it.
“I will never ever agree to a de minimis rate,” Council Member Kelly Brynteson said. “I view it as a loophole to be able to raise taxes over what our residents would be able to vote on… . I am fiscally conservative to a core and that’s where I’m going to stay.”
The no-new-revenue M&O rate is $0.1701 per $100 of valuation, a slight increase from the previous year’s tax rate at $0.1696.
According to city documents, the average homeowner's city property tax bill will increase by $10 annually under the NNR M&O rate.
The impact
Under the no-new-revenue M&O tax rate, along with additional expenditure reductions including staffing adjustments and departmental budget cuts, the budget still has a shortfall of more than $581,000.
Under the de minimis rate, that shortfall would have been approximately $201,000, City Manager Joseph Molis said.
To close the $581,000 gap, council discussed a variety of options including pulling from savings, service cuts and potential staff layoffs.
“I’m real uneasy about the $581,000 coming out of savings… .” Council Member Logan Brown said. “At this rate I do think that layoffs need to be on the table … $581,000 is a pretty big shortfall to pull out [of savings].”
Yet, city staff voiced opposition to layoffs and support for the city manager’s original budget, which included the de minimis rate and some budget reductions.
“I feel like I speak for the group when I say no one is in favor of layoffs,” Lakeway Police Chief Glen Koen said. “All your department heads, all your staff members, work very hard for the city and for you and for the residents, and we’re just asking for time to continue to work hard … . We support thoughtful and hardworking approaches to [the budget] and we believe in the plan that the city manager and the finance team put together.”
City Council ultimately approved the budget with the $581,000 gap to be filled by the reserves, with no plans for layoffs or further service cuts.
By the numbers
The city’s largest expenditures come from the general fund and the parks bond fund, with the general fund expenditures sitting at nearly $20.9 million and the parks bond fund at $13 million. The general fund covers the city’s day-to-day operations including payroll, police and other community services. The parks bond fund accounts for bond proceeds and related investment earnings dedicated to parks and recreation capital projects.
What else
The budget and tax rate will begin on Oct. 1.
Lake Travis ISD adopted a rate of $1.0329 per $100 of valuation, a slight decrease from the previous rate of $1.0397.
Travis County homeowners may see a slight increase in property taxes compared to the previous year, but the budget and tax rate have not been adopted yet.
