The city of Kyle implemented a hiring freeze April 21 as staff and the City Council face a budget shortfall.
On May 16, city staff presented the council with a detailed budget presentation outlining the multiyear causes that have resulted in a projected $14.2 million budget shortfall by the end of the 2025-26 fiscal year.
The two-minute impact
The city’s budget is made up of four major operating funds: the general fund, the water utility fund, the wastewater utility fund and the storm drainage utility fund, according to agenda documents. The city must maintain a reserve fund in the general fund that is at least 25% of operating expenses.
The required reserve fund balance for fiscal year 2025-26 is approximately $19.8 million. The estimated fund balance total for the end of the fiscal year is around $10.3 million.
With an additional $4.68 million operating shortfall for the current year, city staff projects a shortfall of $14.2 million in the general fund at the end of the fiscal year.
“The key takeaway is that the general fund is under structural pressure,” Assistant Director of Finance Holly Holt-Torres said. “Revenues are not keeping pace with the current level of recurring expenditures.”
A hiring freeze and discretionary spending controls were instituted by former Kyle City Manager Bryan Langley before his departure, interim City Manager Perwez Moheet said. Positions on the current freeze list will be evaluated on an individual basis by city staff to assess each role’s need.
How we got here
City expenditures saw a clear incline and revenue saw a decline beginning in fiscal year 2023-24, Moheet said.
Multiple factors contributed to the city’s budget shortfall building over the past three fiscal years, Moheet said, including:
- An incline in expenditures and a decline in revenue
- Economic conditions
- Significant city growth
- Expanded staff
- Rising operational costs
“The city's budgetary and financial challenges did not simply emerge this month or this fiscal year,” Moheet said. “These budgetary challenges have developed over multiple fiscal years, beginning with the 2023-24 budget cycle.”
Langley provided city staff and the City Council with recommendations for stabilizing Kyle’s finances and reducing the shortfall, according to a social media post made by Mayor Yvonne Flores-Cale.
The recommendations include:
- A hiring freeze for nonessential positions
- Up to 10% budget reduction for each department
- Reverse a $1 million transfer made from the general fund to create a new health insurance fund
- Reverse a $1 million transfer made from the general fund for roundabout beautification
- Eliminate vacant positions
- Evaluate existing contracts yet to be paid out of the general fund for cancellation, postponement or repurposing
- Reevaluate the capital plan and associated funding options
Looking forward
To reduce the shortfall, some city projects may be delayed, spending may be reduced and priorities will be evaluated, Flores-Cale said in her post.
Through May and June, the city budget team will develop options to close the existing funding gap, according to agenda documents. Departments will finalize their proposed budgets and review them with Moheet.
“[The shortfall] didn't happen this year, it didn't happen last quarter, it happened over multiple years,” Moheet said. “Because it happened over multiple years, the recovery will also take and require a multiyear effort. The positive side to all this discussion is, it can be fixed. We can solve it together, all of us, staff, council, residents and taxpayers, everybody together.”
