The Amarillo City Council spent Thursday digging into the numbers behind a proposed multi-million dollar city budget, weighing a lower property tax rate against employee raises, police vehicles, street reconstruction and higher utility fees.

Thursday marked the second of three scheduled budget workshops this week. Councilmembers will return Friday at 8 a.m. to review remaining department requests and begin narrowing down which projects and expenses will make it into the city’s next budget.

City Manager Grayson Path said the goal Thursday was to put supplemental spending requests and proposed one-time capital improvement projects, or CIPs, in front of the council and get direction on how to allocate the money available.

Councilmembers Don Tipps and David Prescott, representing Places Two and Three, left before the council’s lunch break. Prescott later rejoined the meeting by video while traveling.

City works through questions about available cash

Before councilmembers began weighing individual projects, Finance Director Katrina Owens explained how the city determines how much money is actually available to spend.

The process begins with Amarillo’s annual comprehensive financial report, or ACFR, an independently audited snapshot of the city’s finances at the end of a fiscal year. The latest report covers fiscal year 2024-25.

Staff then adjusts those figures for more recent revenues and expenses, previously committed money, required reserves, restricted funds and upcoming debt payments.

That process recently uncovered a significant reporting problem.

Reports generated through the city’s new financial software produced cash-flow figures that need to be corrected. The ACFR lists approximately $288 million as committed, while Owens said the actual figure is closer to $207 million. The city’s independent auditing firm is working to correct the report.

Mayor Cole Stanley said the city’s planned forensic audit could also examine CIP commitments and help verify the numbers. The city issued a request for quotations for that audit Tuesday.

Owens summarized the central question facing the council: “What cash can we responsibly commit after reserve calculations are determined?”

The total budget figure presented Thursday also differed substantially from the proposed budget document posted earlier in the week. Chief Financial Officer Lola Ogunremi presented a total proposed budget of $616,218,412, a 10.6% increase from last year. The introductory letter in the proposed budget posted Tuesday listed a total of $493.7 million.

Council asks staff to examine lower property tax rate

Councilmember Les Simpson asked city staff to explore building the budget around the no-new-revenue property tax rate.

Staff’s current proposal uses the voter-approved tax rate of $0.44728. The no-new-revenue rate is $0.42170, which is also below the 2025 rate of $0.43070.

The no-new-revenue rate is designed to generate roughly the same amount of property tax revenue from properties taxed in both years despite changes in property values. It does not mean each homeowner would receive the same tax bill as the previous year.

According to the city’s taxpayer impact statement, the no-new-revenue rate could save the average Randall County homeowner about $5 on the 2026 city tax bill. The higher voter-approved rate could instead increase the average bill by nearly $60.

The impact would be different in Potter County, where property values increased more. The average Potter County homeowner could pay about $45 more even at the no-new-revenue rate, while the voter-approved rate could increase the average bill by approximately $85.

Texas cities generally can increase property tax revenue for maintenance and operations by 3.5% annually without triggering an election, while unused portions of that growth allowance can potentially be carried forward for up to three years.

Path said adopting the no-new-revenue rate would reduce the proposed budget by roughly $700,000.

Stanley asked whether staff could begin approaching the budget with the lower rate in mind. Path then directed department heads to look for recurring requests that could instead be paid as one-time expenses.

Property taxes provide about 20% of Amarillo’s revenue, while sales taxes account for approximately 33%. Fees and other revenue sources make up most of the remainder.

Water, sewer and other fees could increase

Property taxes are not the only area where residents could see higher costs.

The proposed budget includes a 3% increase in residential and commercial solid waste collection fees and a 24% increase in landfill tipping fees, equivalent to roughly another $10 per ton.

Water and sewer operating fees would each rise 8%, while water and sewer debt-service fees would increase 3%. Drainage operating fees would increase 3%, with another 5% increase proposed for drainage debt service.

The budget also includes cost-recovery fee increases across departments including the City Marshal, Animal Management, Environmental Health, Athletics, Fire and Fire Marshal. Many of those charges apply to specific services rather than regular monthly household bills.

Council has roughly $45 million for one-time projects

Staff presented councilmembers with two broad categories of available money Thursday: recurring funds that can support supplemental budget requests and one-time cash that can pay for capital projects.

The general fund has approximately $6.2 million available for recurring supplemental requests. Path said strong recent sales tax collections could potentially allow the council to raise that amount to $7.2 million, although he cautioned that sales tax revenue can fluctuate.

Water and sewer has another $2.5 million available, the airport has $620,000, drainage has $200,000 and the IT fund has $135,000. The airport and IT amounts are intended for cost-of-living or other personnel increases.

For one-time CIPs, staff identified $11.9 million in the general fund, $13 million in water and sewer, $5.7 million at the airport, $800,000 for drainage, $3 million for solid waste and $1.9 million in the Civic Center fund.

Combined, that gives councilmembers roughly $45 million in one-time cash to allocate. Last year, the council allocated about $30 million.

Those decisions are being made while Amarillo carries approximately $566.8 million in total debt, nearly half of which is tied to water and sewer. Annual debt service represents 10.8% of the proposed budget, while approximately $7.3 million in debt is scheduled to roll off at the end of the coming fiscal year.

Employee raises could consume much of recurring money

Path recommended that councilmembers first settle how they want to approach employee compensation because personnel costs account for nearly half of city expenses.

His recommendation includes a cost-of-living adjustment, or COLA, along with funding portions of a previous pay study that identified city positions being compensated below the market.

A 3% COLA would cost approximately $4.6 million. A 2% adjustment would cost $3.1 million, and a 1% increase would cost about $1.5 million.

Tipps said he would prefer to continue emphasizing the merit raises approved last year so higher-performing employees receive greater rewards.

Path said employees receiving poor evaluations are placed on performance improvement plans and can ultimately be terminated if they do not improve. He also pointed to employee retention as a problem, saying some workers leave for higher-paying private-sector positions before the city can fully train and develop them.

Stanley asked Path to return with figures showing the cost of combining a 3% COLA with partial implementation of the pay study, along with how much recurring money would remain for other requests.

Police seek $27 million for take-home vehicles

The Amarillo Police Department presented nearly $30 million in capital requests, led by a proposal to spend approximately $27 million purchasing and equipping 175 vehicles for a take-home vehicle program.

Police Chief Thomas Hover said assigning a vehicle to one officer rather than having multiple officers use the same vehicle across shifts could reduce mileage and maintenance costs over time. The program would also distribute police vehicles throughout Amarillo, potentially improving emergency response while increasing police visibility in neighborhoods.

APD also requested $688,000 to encrypt its police radio channel.

Hover described encryption as an officer-safety measure because people can currently monitor police traffic and potentially determine when officers are approaching. He also raised concerns about artificial intelligence being used to automatically transcribe scanner traffic. Incorrect AI-generated transcriptions, he said, could spread false information about vehicles or suspects and prompt members of the public to act on inaccurate information.

Staffing remains another major concern for the department.

Hover said APD accumulated approximately 29,000 overtime hours during a six-month period, roughly equivalent to the working time of 14 officers.

Amarillo officers spend about 75% of their day responding to calls and other dispatched activity, Hover said, compared with an average of about 50% at other departments. That leaves less time for proactive policing and community engagement.

Hover’s recent staffing study recommended 175 officers. APD currently has fewer than 150.

He is also pursuing grant funding to bring two mental health physicians into programs serving first responders. Hover and Fire Chief Jason Mays have separately budgeted money for a physical therapist.

Fire department projects $1.3 million in unscheduled overtime

The Amarillo Fire Department presented approximately $13.5 million in supplemental requests, including cardiac monitors and repairs and improvements to buildings, driveways and other facilities.

Mays also highlighted a new fire training classroom included in the city’s five-year plan but not among Thursday’s listed requests. He said additional training capacity will become increasingly important as Amarillo grows and needs to move more cadets through its fire academy.

The department expects approximately $1.3 million in unscheduled overtime next year.

Mays said AFD begins an academy by hiring more cadets than it has firefighter vacancies. However, the training process takes long enough that additional firefighters can retire or leave before those cadets become ready for active duty.

Street projects could require another $42.5 million in debt

The street department brought forward $2.5 million in proposed cash-funded projects and another $42.5 million that would require debt financing.

The debt-funded requests include $30 million for annual arterial street reconstruction and $12.5 million for street resurfacing. Another $2.5 million would pay for other street maintenance during the year.

The street requests, APD’s proposed vehicle program and employee compensation decisions underscore the challenge facing councilmembers as they work toward a final budget: Amarillo has tens of millions of dollars available, but considerably more in competing requests.

The council is scheduled to return Friday at 8 a.m. to review the remaining departments and continue deciding which expenses will become part of Amarillo’s next budget — and how much taxpayers and ratepayers will ultimately be asked to cover.