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Short-term Factors
Shor t-Term Fac tors In|uencing the FY 2026 Budget
The FY 2026 budget was shaped by several key shor t- term factors, including adjustments to employee compensation and
bene{ts, utility and drainage rate changes, capital project funding, and the continued emphasis on economic
development . These factors re|ect the City's commitment to {scal responsibility while maintaining a high standard of
ser vice for the community.
. Salary and Bene{ts:
Health Insurance Costs: The City absorbed a 7.6% increase in health insurance premiums (negotiated down
from 18%) and a 2 .6% decrease in dental insurance premiums, ensuring no rate increases for employees. This
commitment to competitive compensation and bene{ts, especially for Public Safety employees, is critical for
attracting and retaining top talent .
Compensation Study: The budget includes funding for a full compensation study to be completed in FY 2026 .
This study is expected to in|uence future budgets, par ticularly in FY 2027 and beyond, as the City strives to
remain competitive in the dense DFW area. Attracting and retaining quality employees, par ticularly in Public
Safety, will require creative solutions moving for ward.
. Fees and Revenues:
Utility and Drainage Rate Adjustments: Water and sewer base rates were increased to cover rising operating
costs, while drainage rates were increased as par t of a multi-year plan aimed at building fund balance for future
cash-funded capital projects. For the average residential customer with a 1” meter, the combined water and
sewer base rate increased by $1.67 (4 .4%), and the drainage rate increased from $12 to $14 per month.
No Major Fee Changes: Aside from adjustments in library fees, no signi{cant fee changes were made for FY
2026 .
. Capital Improvements:
Ongoing Investments: The City continues its focus on quality of life, public safety, and infrastructure
improvements. All projects in the {ve -year Capital Improvement Plan are cash-funded using excess reser ves or
grants, ensuring no reliance on debt {nancing.
. Program Enhancements or Reduc tions:
Homestead Exemption: An increase of 7% to 14% homestead exemption will help offset proper ty tax increases
for residential taxpayers. There were no program reductions for FY 2026 .
. Tax Levels and Use of Reser ves:
Increased Proper ty Tax Revenue: Due to in|ation, public safety, and utility costs, proper ty tax revenues
increased by $880 thousand. The proper ty tax rate was raised to $0. 311931 per $100 of valuation, up from
$0. 276204 in the prior year. Sales tax revenues were budgeted |at as collections have stabilized.
Use of Reser ves for Capital Projec ts: While no reser ves were used for shor t- term operating costs, some capital
projects were funded through excess reser ves, consistent with the City's {nancial policy.
. Ser vice Levels and Assumptions:
Stable Ser vice Levels: Ser vice levels remain unchanged for FY 2025. The City continues to prioritize public
safety and quality of life improvements, operating with lean staf{ng and minimal overhead.
. Unfunded Mandates:
Monitoring for Impac ts: Although no new unfunded mandates were introduced, the City continues to monitor
for potential state or federal requirements that could impact future budgets.
. Economic Development Strategies:
Continued Suppor t of Local Programs: The City continues its key economic development initiatives, including
the gift card program in the TIF fund. Residents are encouraged to shop locally, as sales tax collections directly
bene{t the City's revenue.
. In|ation Assumptions:
Budget Adjustments for In|ation: In|ationary pressures were considered in this budget , par ticularly in the
supplies and utilities category. Increases in chemical costs, utilities, proper ty insurance, and health insurance
FY 2025-2026 Annual Budget | Colleyville Page 34
