The Amarillo City Council faces tough budget choices to keep services strong amid rising costs and growth. Tax and fee increases are on the table, but city leaders want to balance fiscal responsibility with residents’ ability to pay.
After three days of intense budget workshops, it became clear that the council would need more time to finalize the Fiscal Year 2025–2026 budget, postponing what was initially planned as a conclusion to discussions this week.
The city’s $569.6 million proposed spending plan aims to support nearly 2,400 full-time employees and fund over 250 programs and services. However, the council faces an uneasy balancing act: maintaining public safety, investing in infrastructure, addressing staffing shortages, and managing rising operational costs — all while grappling with a projected revenue shortfall and looming deadlines.
“There’s just so much,” said Councilmember Don Tipps (Place 2). “Now we’ve got a time deadline that we’re against and we’re faced with. And I appreciate you recognizing the fact that we’re in an impossible situation with this council.”
Councilmember David Prescott (Place 3) echoed the sentiment. “It’s a very complex budget. There are so many services and service lines in different aspects to this budget. It’s a lot, but it’s complicated, but I have full faith in our staff right now. The council is in a tough spot right now. With the revenue that we have to spend, so we’re going to have to make some hard decisions to get through this.”
Understanding Amarillo’s Budget Landscape: A Blueprint for the Future
City Manager Grayson Path opened the budget workshops by describing the budget as a “blueprint,” a starting point for discussion rather than a fixed blueprint.
“The proposed Fiscal Year 2025/2026 budget totals $569.6 million,” Path explained on Tuesday. “It funds more than 250 programs and services, supports nearly 2,400 full-time employees, and reflects our continued effort to deliver core services, address emerging needs, and respond to the priorities of our community and this governing body.”
Path’s framing highlights a key truth about municipal budgeting: it is an iterative process, where city leaders and staff work together to align resources with priorities, responding to changing economic conditions, new opportunities, and unforeseen challenges.
The proposed budget represents a 14.1% increase over the previous fiscal year’s $499.3 million, driven in part by federal and state grants, but also by inflationary pressures and population growth. Over half of the increase in spending is funded by grants, which, while valuable, often come with restrictions on how the money can be used.
Rising Costs and Increasing Demands: What’s Driving the Budget?
The city is facing rising costs across the board, from commodities and construction materials to software and IT security. Amarillo, like many cities nationwide, must continually invest in technology upgrades to protect against cyber threats and ensure efficient service delivery.
In addition, public safety remains a top priority. The proposed budget calls for new police officers, firefighters, and animal management personnel. Notably, it includes raises of 5% for police officers and 4% for firefighters, reflecting a competitive labor market and efforts to retain critical personnel.
Assistant City Manager and Chief Financial Officer Laura Storrs detailed other important investments:
Capital Projects: These include continued funding for street maintenance, design work for wastewater treatment facilities, fleet leasing, and replacement of aging heavy equipment and fire apparatus.
Employee Compensation: The budget incorporates a 2% cost-of-living adjustment and a 2% merit raise for civilian employees, along with increasing the retiree COLA from 50% to 70% of inflation — a significant benefit that helps retirees keep pace with rising living costs.
Utility Fee Increases: To fund capital improvements, the city proposes a 7% increase in residential and commercial solid waste fees, a 5% increase in water and sewer rates, and a new street maintenance fee that remains under consideration.
Property Taxes: Balancing Revenue Needs and Taxpayer Burdens
Property taxes form a significant source of revenue for city governments in Texas, funding services such as public safety, streets, parks, and administration. Texas law defines different tax rate components:
Maintenance and Operations (M&O): Covers day-to-day services like police, fire, salaries, supplies, and more.
Interest and Sinking (I&S): Pays debt service — interest and principal on bonds issued for capital projects.
Each year, cities calculate a No-New-Revenue (NNR) Rate, which would generate the same property tax revenue as the previous year despite changes in property values. The Voter-Approval Tax Rate (VATR) allows a modest increase (up to 3.5%) in the M&O rate without triggering a mandatory election.
For 2025–26, Amarillo’s NNR rate is $0.37355 per $100 valuation. The council’s proposed tax rate is the VATR at $0.43070, representing an increase from last year’s $0.38723. This would raise the city portion of the average Amarillo homeowner’s property tax bill by approximately $11 annually.
The breakdown shows the I&S portion rising from $0.06856 to $0.09956, reflecting debt service needs, and the M&O portion rising from $0.31867 to $0.33114, covering operational costs.
Mayor Cole Stanley stressed the importance of ensuring that any tax increase be aligned with the city’s top priorities.
“I am in favor of looking and seeing like where the value of that money is going, and what can we do with that?” Stanley said. “So if it hits our top two priorities, and it’s what it’s going to cost to run the city, then yes, I think we need to charge everything that we can charge in order to take care of business.”
The Debate Over a Street Maintenance Fee
One of the most debated proposals this budget season is a new street maintenance fee, which would create a dedicated enterprise fund to support the Street Maintenance Division, moving that budget out of the general fund.
Assistant City Manager Donny Hooper explained the need for this new revenue stream:
Since 2018, the street department has lost eight full-time positions, yet the mileage of streets under its care has increased by 67%.
Operating the division requires both personnel and materials, and current funding levels are inadequate for maintenance demands.
The proposed fee would be billed monthly through utility bills, calculated using a “trip factor index” that accounts for the wear and tear different property types place on city roads.
Hooper proposed a phased implementation: starting with residential fees of $3 per month and commercial fees at a minimum of $45 monthly. However, the city would need to conduct public outreach, legal feasibility studies, and logistical preparations, with an anticipated implementation timeline of four to six months after approval.
While fees like this are common in other Texas cities, some council members expressed concern about layering fees on top of rising taxes and other utility rate hikes.
City Manager Path warned that eliminating this fee without reducing services or cutting costs would require finding alternative funding sources.
Capital Projects: Investing in Amarillo’s Future
The budget allocates $113.5 million for capital improvements, reflecting Amarillo’s efforts to modernize infrastructure and public facilities. Key projects include:
Wastewater Treatment Facilities: $25 million is earmarked for the first design phase of new or expanded wastewater treatment plants, a critical infrastructure need for the growing city. Much of this cost may be offset by anticipated grants.
Street Repairs and Upgrades: $2.5 million for milling, filling, and arterial reconstruction projects aimed at improving traffic flow and safety.
Public Buildings: $1.8 million to replace the Downtown Library roof and HVAC systems, $1.5 million to demolish the old City Hall, and $1.2 million for improvements to the new City Hall.
Public Safety Equipment: $547,000 for a new chiller at the Amarillo Police Department and $500,000 for expansion of the outdoor warning siren system.
Parks Maintenance: $922,000 for equipment and park upgrades.
Solid Waste Management: $3.65 million allocated for replacing dumpsters, along with $500,000 for additional improvements.
Department Requests and Priorities
Each city department presented their budget needs during the workshops, highlighting both ongoing and emerging priorities:
MyAmarillo (311 Hotline): Increasing call volumes led to the creation of a standalone department with 18 employees and a request to add 14 more. This expansion aims to reduce the burden on the Amarillo Emergency Communication Center (AECC), which currently faces staffing shortages and overtime.
Airport: Capital projects totaling $7.7 million include expanded parking facilities, partially funded by Federal Aviation Administration grants.
Community Development: Anticipated grant revenues exceed $14 million, supporting housing assistance and home investment programs.
Public Health: Funds from opioid settlement cases are beginning to flow, with plans to use approximately $390,000 to support education and purchase Naloxone (Narcan).
Animal Management & Welfare: Requests include hiring three new officers and reclassifying four trainees to full officers.
Fire Department: Proposes hiring one additional firefighter per the meet-and-confer agreement with the Amarillo Professional Fire Fighters Association.
Police Department: Requests a school liaison officer position funded primarily by the Canyon Independent School District, a new civilian investigator, and $700,000 additional overtime funds to address staffing gaps.
Revenue Projections: Gains and Challenges
City officials project a net revenue increase of about $9 million driven by multiple sources:
Revenue Source Increase
Property Taxes $3.8 million
Sales Taxes $2.7 million
Solid Waste Fees $2.0 million
Building Permits $1.0 million
Interest Income & Other $0.8 million
However, the city expects to lose $1.4 million in federal transit grants due to Amarillo’s growing population, which disqualifies it from some programs designed for smaller communities. This will place added pressure on the city’s transit services budget.
Debt and Fiscal Responsibility
Amarillo will begin the new fiscal year with $554.6 million in outstanding debt. If the council approves additional debt issuances — including a proposed $7.5 million for fleet and equipment replacement — that number could rise to approximately $603 million.
Managing this debt responsibly while funding ongoing capital needs is a tightrope the city must walk, especially as voter approval tax rates limit revenue growth without elections.
Legislative Factors: SB 9 and Tax Rate Caps
Adding complexity to budget planning is proposed legislation in the Texas Legislature. Senate Bill 9, introduced during a recent special session, would lower the allowable tax rate increase without voter approval from 3.5% to 2.5% for municipalities with populations over 75,000 — a category Amarillo will soon join.
If passed, this bill would further constrain Amarillo’s ability to expand its budget to keep pace with inflation and service demands, placing greater importance on fee revenues and budget cuts.
Council’s Path Forward: Extended Workshops and Hard Decisions
The council plans to reconvene next Friday, August 15, for a special meeting to discuss potential cuts if the street maintenance fee is removed from the budget. City Manager Path emphasized that staff needs clear direction on what areas could be cut to balance the budget without that new revenue source.
“I think we’re going to have to make some hard decisions,” Councilmember Prescott said. “But I have confidence that with input from the council and the community, we can find the right balance.”
Mayor Stanley remains optimistic, highlighting the city’s growth and resilience:
“We’ve identified more needs and bigger dollar items than what we anticipated. That’s not abnormal, and so there’s no quit in this council or this staff. We’ve got a strong year ahead of us, and we need to plan for growth, and we need to plan for prosperity, and both of those are what we’re seeing coming.”
Amarillo’s 2025–26 Budget Explainer: What You Need to Know
Total Proposed Budget: $569.6 million, up 14% from last year, supporting nearly 2,400 employees and over 250 city services.
Key Challenges:
Rising costs for materials, salaries, and technology.
A projected revenue shortfall requiring careful balancing of needs and funds.
Losing some federal transit grants due to population growth.
Property Taxes:
Proposed tax rate is $0.43070 per $100 valuation, up from last year’s $0.38723.
This means an average homeowner could see an $11 increase in city property taxes annually.
The increase includes funds for both daily operations (police, fire, city services) and debt payments.
Fee Increases:
Solid waste collection fees proposed to rise by 7%.
Water and sewer fees proposed to rise by 5%.
A new street maintenance fee is being considered, estimated at $3/month for residents and higher for commercial properties, to fund road repairs and maintenance.
Staffing and Services:
The budget proposes adding 44 new full-time positions across departments, focusing on public safety, animal management, and customer service (311 hotline).
Police and fire departments would receive pay raises (5% police, 4% fire) to help recruit and retain staff.
Capital Projects:
$113.5 million allocated for major infrastructure and facility improvements, including wastewater treatment design, street repairs, and public building upgrades.
Next Steps:
The City Council postponed final budget approval to allow more time for discussion.
They will consider possible cuts if the street maintenance fee is removed.
Final budget vote is expected in September.
Conclusion
The Amarillo City Council’s 2025–2026 budget workshops underscore the complexity and difficulty of municipal budgeting in a time of growth and inflation. Balancing competing priorities, limited revenues, and community expectations requires careful deliberation, creativity, and cooperation among elected officials, staff, and residents.
