Brittany Kelley
KYLE — Interim city manager Perwez Moheet presented a proposed budget for fiscal year (FY) 2026-27 that is nearly $200 million less than the previous year’s at the Kyle City Council special meeting Aug. 1.
“I am recommending a balanced budget for fiscal year 2026-27. While that statement may appear straight forward, the work required to reach this point has been anything but easy and straight forward. As you all may know, the city entered this budget cycle facing significant and many financial challenges. Prior to developing the proposed budget for next fiscal year, it was critical that we address the projected $14.2 million budget deficit in the city’s general fund for the current fiscal year '25-’26 operating budget,” explained Moheet. “This required methodical review of operating and capital expenditures, organizational priorities and practices, financial assumptions and line-by-line item expenditure trend analysis of every single department, every single city fund [and] every single capital improvements project.”
These efforts have been ongoing since May, he continued, resulting in significant sacrifices, including the suspension of pay increases and cost of living adjustments for all civilian employees, the leave buyback program, tuition reimbursement program, cash contributions for health reimbursement arrangement account and the city-paid 12-week parental leave program. Furthermore, there are 460 full-time equivalent positions proposed — a result of 11 positions eliminated or $1.88 million in annual cost savings — and 24 positions, or $2.45 million, frozen or unfunded positions.
“As the interim city manager, I fully recognize the impact of these actions on our workforce. Our employees are the city’s most valuable asset. They are the individuals who deliver services, respond to emergencies, maintain our infrastructure, support our residents and business and help move this organization forward every single day. Despite these financial challenges, our employees stepped up and have continued to demonstrate exceptional professionalism, resilience and commitment to public service,” said Moheet.
He shared that he hopes to restore structural balance, strengthen the city’s financial foundation and to position the city for long-term financial stability with this budget.
The proposed budget for FY 2026-27 is $416,966,023, consisting of:
• Capital improvement projects (CIP): $288,466,975
• General fund: $69,227,849
• Water utility: $27,755,490
• Debt service: $14,542,101
• Wastewater utility: $9,656,310
• Other: $5,759,272
• Storm drainage: $1,558,026
Additionally, the estimated general fund balance for the end of the budget cycle is $20.37 million, which will exceed the city charter's minimum reserve requirement by $2.5 million, and no rate increase is projected for the water service or storm drainage rates.
Mayor Yvonne Flores-Cale asked Moheet what the difference between the current $603 million approved budget and the proposed $417 million budget is.
“In a nutshell, the cost estimates were higher,” Moheet said. “They thought they could do all those projects in one year, but it was unrealistic. So, the budget reflected that unrealistic estimate. We are scaling back, based on reviewing thoroughly what our cash flow requirements will be [and] how many of those projects we can actually lift off the ground.”
Items that are present in the budget include:
• Santa Claus and the Grinch plans
• City parks to be fully funded and maintained
• 4% pay increase for all sworn police officers
• 2% peer city-based pay increase for all corporal ranked positions in the police department
• All road bond program projects are continuing
Items not included in the budget are as follows:
• Non-essential travel
• Federal/state lobbyists
• Annual banquet for city boards and commissions
• Dinner service for council meetings
• Pride celebrations or Pride special events program
• Undergrounding of existing overhead utilities
In response to council member Claudia Zapata’s question regarding forensic audit funding, Moheet noted that there is an allotted amount included, but he did not specify it, as it would put the city at a disadvantage when submitting requests for proposals (RFP). For example, the interim city manager said if he publicly claimed that the budget for the forensic audit was $50 million, he would then receive RFPs at $49.9 million. So, he is not revealing the number at this time, but stated that he could email the council members privately.
As part of the review in preparing for the budget, staff looked at organizational structure for each department. Specifically, it was decided that the Transportation & Public Works Department would be divided into two departments: Transportation & Public Works and Capital Improvement Projects & Engineering. The first will focus on day-to-day operations, while the latter will focus exclusively on planning, design, engineering, project management and construction of CIPs and the 2022 Road Bond Program.
The CIP & Engineering Department was formally a division that answered to the director of Transportation & Public Works, but staff believes that efficiency and cost savings will come from this separation. Those working in this department already had funding in the general fund, said Andy Alejandro, interim deputy director of Finance.
The following restructures were also made:
• Reorganize the Beautification Division into the Right-of-Way Maintenance Division; it will maintain streetlights, mowing, permitting and inspections, traffic control and right-of-way maintenance, as well as save $40,000 per year by eliminating landscaping contracts and using the division to maintain city facilities.
• Appoint Leon Barba as director of CIP & Engineering, while retaining the title of city engineer.
• Elimination of the Parks and Recreation deputy director and business and strategic planning manager; overall the department downsized from 64 to 45 positions.
• Created a new Parks and Recreation operations manager to oversee division managers.
• Recreation and special event employees report to one division manager.
• Parks and Recreation planning and project manager moved to the Development Services Department.
• Aquatics maintenance technician reports to the Parks Maintenance Division.
Alejandro then touched on the city’s property tax rate. Kyle holds the second highest property rate, behind San Marcos, in comparison to its 10 peer cities of Georgetown, Buda, Cedar Park, Round Rock, New Braunfels, Leander, Pflugerville, San Antonio and Austin at $0.5957. The city is at the opposite end for the assessed valuation per capita, sitting in the second lowest position at $107,871, just above San Antonio and below Austin. This number is 1.28% less than 2025 and is determined by taking the certified assessed values from the Hays Central Appraisal District, then dividing it by the city’s population, said Alejandro.
“Based on our assessed valuation, the average home value in 2026 is $298,621,” said Moheet. “Looking at average home values in 2025 at $315,017 and looking at our current tax rate of $0.5957, the gross tax levy was $1,638.28. That’s before applying the homestead reduction. Assuming that the tax rate stayed the same … the tax levy and the average net tax bill will be less than what it was in 2025.”
Flores-Cale asked whether the tax rate can even be increased, due to the voter-approved tax rate being $0.59, but Moheet shared that this was an estimate on the bond itself, though there are other factors, such as debt services for other projects and operating expenses, that could create a tax increase above $0.59. However, he doesn’t believe the need is there to do so.
“In the current tax rate of $0.5957, there is embedded a debt defeasance that council approved. Next year, we’re not doing a debt defeasance, so that goes away. So, we should see a tax rate reduction, [but] I’m just generally speaking; I’m not guaranteeing anything until I see the tax rate calculations,” he said.
Although there was discussion about how the current tax rate might be impacted this year, Moheet noted that property tax rates will be discussed in detail at the Aug. 13 meeting.
There are three meetings left in the 2026-27 budget discussion, to be held at 6 p.m. Thursday Aug. 13, 5:30 p.m. Saturday, Sept. 5, and 6 p.m Tuesday, Sept. 15, according to the presentation.
To listen to the full discussion, visit bit.ly/4xlrFyx.
