Southgate adopts tight FY2026–27 budget after $9.3M in cuts; council continues debate on utility users tax

Southgate adopted a pared FY2026–27 operating budget and capital improvement program Wednesday after a year‑long process that identified an ongoing structural gap. The council approved the spending plan and master fee schedule after staff outlined nearly $9.3 million in reductions over two years intended to balance the general fund starting July 1.

The council vote followed a detailed presentation from Administrative Services director Louise (transcript name) and City Manager Houston, who recapped the city’s multi‑year shortfall and a list of cost drivers: pension liabilities, rising health and liability insurance costs, energy and contract inflation, and weaker than projected sales‑tax receipts. “Reoccurring expenditures are still exceeding reoccurring revenues,” Louise told the council, summarizing the structural nature of the gap.

Why it matters: without structural revenue increases, the city projects it could exhaust reserves within a few years. Staff said a passed utility users tax (UUT) would create a predictable, structural revenue stream that could restore services and protect reserves; if the UUT fails, staff warned that more cuts would be required and insolvency risks would grow.

What was adopted: the council approved total appropriations across all funds of about $228 million, including roughly $72 million in general‑fund appropriations and a roughly $88.9 million capital program. The adopted budget reflects the reductions the council directed earlier this year and preserves emergency reserve targets while drawing on a one‑time stabilization reserve to smooth the transition.

The UUT debate: staff returned to council with updated revenue forecasts showing revenue softness since the April discussion. Under those forecasts, a 7% UUT — the rate staff had been asked previously to place on the ballot — would leave little margin and require further cuts to fully restore services. An 8% UUT reduces the gap materially and gives limited one‑time room; a 9% UUT provides substantially more structural relief in the near term.

Household impact: staff modeled estimated impacts for a typical combined monthly utility bill. The difference between options is modest in dollar terms: moving from 7% to 8% was shown as roughly a few dollars more per month for an average household; a 9% rate adds in the neighborhood of $10–$11 per month compared with no UUT, depending on household usage and which utilities are taxed.

One‑year water discount proposal: to soften the first‑year hit on households if council chooses a higher rate, Vice Mayor Rios asked staff to model a one‑year, temporary discount to water bills funded from water fund reserves. Staff reported a 10% discount would reduce water‑fund revenues by about $2 million for one year and would be feasible using current reserves but warned that larger or multi‑year discounts would slow scheduled water CIP projects (meter replacements, treatment upgrades, water‑main work) and require a careful prioritization.

Public safety and community comments: dozens of residents weighed in during public comment. Several speakers — including a Southgate Police Officers Association representative — urged council to prioritize public safety spending and said the poorest residents suffer most when response times lengthen. Others pressed for more transparent outreach about restricted (grant) money versus general‑fund spending.

Next steps: Council voted to continue the final decision on the UUT rate so staff can return with additional scenarios (different water‑discount levels and attendant CIP impacts) and final ballot language. Council directed staff to submit the adopted budget and to return UUT policy options and precise ballot materials for the council’s final action at a future meeting. The November 3 ballot remains the target date for voter consideration of a UUT.