City Manager Proposes Budget Without Layoffs After Month of Pushback; Funding Cuts Planned Elsewhere
- Stevie Quilo
- 12 hours ago
- 10 min read
For more than a month, city employees have been waiting and wondering if they are one of the 22 full-time employees and 4 part-time employees slated for layoffs. Pushback from City staff and the City Council has pressured City Manager Shawna Burkhart to create a version of the budget without layoffs. After at least 8 rounds of revisions and repeated public hearings, the City of Del Rio has updated their proposed 2025-2026 fiscal year budget yet again. The City Council delayed the budget vote multiple times, with it now set for September 29, just one day before the legal deadline of September 30.
The main issue is the General Fund, the account from which the majority of staff salary is paid, is not robust enough to cover costs. For years, the City has been transferring money from the Enterprise Fund Reserves into the General Fund to subsidize the budget, especially since the COVID pandemic. This is a frowned upon practice because it shows that the City is not generating enough revenue to sustain itself. The City has been relying on money designated for emergencies, capital improvement projects, and economic development, to pay for general items such as staff salaries instead.
This practice is one of the contributing factors as to why the City has found itself in a financial bind in the first place. Throughout 2025, an in-depth forensic financial audit was conducted by City Finance Director Linda Coones. The City spent months reconciling all accounts, certificate of obligations, ordinances, and expenditures. As a result, awareness of financial deficits came to light. The audit revealed that the City’s financial obligations outweigh revenue generation, resulting in a $6 million deficit. The City has since worked to increase fees, and decrease costs, and drop the deficit down to around $2 million.
In an attempt to correct the General Fund deficit, major departmental budget cuts were made, and the overall city tax rate was increased. But this still wasn’t enough to cover the multi-million-dollar deficit. The city stated: “This budget will raise more revenue from property taxes than last year’s budget by an amount of $1,149,585 or 8.85%, and of that amount, $198,604 is tax revenue to be raised from new property added to the tax roll this year.” The new tax rate will be “$0.7070 per $100 valuation,” higher than the no-new revenue rate.
The City first proposed layoffs at the beginning of August. Layoffs seemed to be the only path forward, according to public presentations from Burkhart. At the public hearing on Monday September 8, Burkhart said the proposed 2025-2026 budget (which included layoffs) would be up for vote on Tuesday September 9 at the City Council meeting. Burkhart said if the budget was approved, 22 full-time and 4 part-time City of Del Rio employees “would receive termination notices on Wednesday September 10.”
During the public hearing on September 8, Burkhart added that, “layoffs are not certain, the City Council does have a chance to veto the budget or ask for final adjustments.” And veto they did. The September 9 City Council meeting agenda was modified after the September 8 Public Hearing, so that “no action will be taken,” and the budget vote was postponed.
During the City Council meeting on September 9, Councilperson J.P. Sanchez commented: “A few years back, we gave the employees a double-digit raise… And we’re suffering for it now, and now we’re going to fire people? That’s a slap in the face. I don’t think that’s right.” Councilperson Randy Quiñones added that the city “is not ready for a reduction in force,” referring to the proposed layoffs. Mayor Al Arreola said, “this council doesn’t want to implement a reduction.” Councilperson James DeReus suggested potential alternative solutions, in lieu of layoffs, such as Enterprise Fund Reserve transfers.
Burkhart made adjustments based on this feedback. On Tuesday September 17, Burkhart returned to City Council and presented two main options: implementing widespread layoffs or continuing the depletion of the City’s dwindling Enterprise Fund Reserves without layoffs. Burkhart warned that if the budget without layoffs was approved, the City would need to focus on increasing revenue generation or else the 2026-2027 budget would be hit even harder than the 2025-2026 budget.
According to Burkhart’s statements to City Council, the budget without layoffs would drop the reserve fund balance from 6.6 million to 4.43 million. Taking the City’s emergency reserve fund down from a 5-month cushion to the state-minimum 3-month cushion. Leaving the City’s future budget for 2026-2027 with no wiggle room. Beyond 2025-2026, the City would not be able to continue to rely on Enterprise Fund Reserves, as there simply would not be enough money in the bank to do so.
If the budget without layoffs is approved for 2025-2026, layoffs would likely need to be revisited again in 2026-2027, unless the city can figure out how to generate upwards of $2 million in additional revenue within the next 12 months. This solution is a double-edged sword, because if a large portion of Enterprise Funds are reappropriated for staff salaries, it will be difficult for the City to use the Enterprise Fund for its original intent of supporting revenue generation.
Municipal Court Judge Kassandra Flores was called out during the September 9 City Council meeting for the court not generating enough revenue. The City recently approved increases in fees that can be seen here: Schedule of Fees & Charges. The City Council suggested that departmental budgets should get more cuts and fees should be increased again, to help with the revenue deficit, specifically naming the Municipal Court for low revenue. Judge Flores returned to City Council on September 17 to retort.
During citizen comments on September 17, Judge Flores said: “I'm here today to clarify concerns that have been brought regarding the Municipal Court and its revenue. I fully understand the concerns regarding our budget and the desire to explore diverse revenue streams… The role of the Court is not to be a reliable stream of revenue, but to be a venue for the City to enforce the laws within its jurisdiction, while simultaneously also being a venue which ensures due process and allows citizens to exert their constitutional rights.”
Active volunteer and community member, Bea Vallejo, also spoke during citizen comments on September 17. Vallejo is in favor of layoffs and shared her thoughts with the City Council. Vallejo talked about the amount of debt that past and current administrations have taken on, claiming the city’s debt is for projects “some never started, others still in need of more debt to complete.”
Vallejo went on to say to City Council: “You make the decisions, and we are forced to pay. It is not okay for taxpayers to be stuck with increases in water and sewer rates, fees, and property taxes, etc. Taxpayers are upset with the waste in salaries for nonessential personnel, supervisors, and directors... Your indecision on voting for budgets presented has created political instability and is hindering economic planning and growth… We cannot continue to survive in this cash and debt-strapped economy.”
Following citizen comments, City Manager Shawna Burkhart took the stand. Burkhart started her budget presentation by reading a Press Release entitled “City to Revisit Adoption of Tax Rate and Budget Amid Ongoing Revisions” that was originally published on September 16. Burkhart thanked the community for their “patience and engagement throughout this process,” and credited City Attorney Ana Markowski Smith for writing the press release.
Press release excerpts include: “Due to the complexity of the budget and the evolving financial landscape, staff was unable to present a finalized version to the Council… Since then, the budget has continued to be refined to better reflect community priorities and operational needs… Both the revised budget and tax rate will be formally adopted by the statutory deadline imposed by the Texas Local Government Code... The City is making every effort to keep the tax rate as low as possible while preserving the workforce that delivers essential services to our residents.”
Burkhart then reviewed her main “talking points” regarding this year’s complicated budgeting process. She mentioned the “$6.6 million shortfall” that the city started with ($6.6 million more in general expenditures than revenue). Burkhart also explained that “the city is using the same transfers as last year from the Enterprise Fund. The Enterprise Funds are subsidizing the budget and ultimately the property tax rate.” She went on to say that with the version of the budget without layoffs, the City would need to transfer an additional $1.9 million from the Enterprise to General Fund.
“Next year, the city will face the same shortfall, with only 3 months reserves. If the city accepts the final budget option without layoffs, the city will be short in revenues… Cashflow of the General Fund will be affected… The General Fund may have to pull from other funds to cashflow payments of bills and payroll throughout the year. The City does not have enough recurring revenues to cover recurring expenditures. Recurring revenues can only be achieved through increases to property tax, increases in sales tax, increases to fines and fees, and increases to permits and licenses,” said Burkhart.
“Without a reduction in force [layoffs], this is the best way to move forward. I still believe that we will have to consider a reduction in force [layoffs] sometime in the future. And as we move through this next year, I will be reducing positions that become vacant, and I will have to hold on to vacancies and try to reduce the costs that way. I will also have to, if through attrition, attrition meaning if someone were to leave a position we would hold that vacancy as well. We will try to create cost savings that way,” said Burkhart. She added that, “performance reviews will be started October 1 and completed October 31 for all employees in the city, that does include police and fire.”
The City Council then engaged in a discussion with Burkhart regarding the impact of the additional Enterprise Fund transfers, asking how it would delay or inhibit previously planned municipal projects. Burkhart pointed to the chart, saying: “You can see how it affects each of those enterprise funds on their bottom line… We are eating down on fund balance on the Enterprise Funds at this point. So you need to be aware of where it leaves you at the end of the year next year.” Councilperson Carmen Gutierrez read out the total transfers from each fund: $200,000 from the International Bridge, $700,000 from the Water Fund, $760,100 from the Wastewater Fund, and $300,000 from the Gas Fund.
Gutierrez commented, “technically we are robbing from Peter to pay Paul.” Burkhart agreed, “that’s correct.” Gutierrez continued: “And that has gotten us in trouble in the past because we had neglected some of the things that we had planned, infrastructure needs. Here we have water, and wastewater, and the gas line. We are also increasing those fees, the rates, to our citizens and so they’re gonna expect improved services.”
Gutierrez reiterated: “My concern is, when we approved the increases to the water and the wastewater for this coming year and subsequent years, it’s because we have infrastructure needs that have to be addressed… I understood that the increase was going to these enterprise funds, so that we can address those needs. So by reducing the amounts, what will not be done, do we know at this time?”
Burkhart responded, “This is simply taking it out of reserves… What’s not going to be done is the Capital Improvements that each fund would have financed out of their own fund reserves. Now, if they were COs, meaning financed by debt, they will occur. But if they were going to be financed by their own reserves that’s what is going to be affected.”
Public Works Director Greg Velazquez joined the podium to help answer the City Council’s questions. The automated water meter project and the water pipe replacement project are already funded. Burkhart confirmed, “it is budgeted so it will stay in, so we will finance over the next 2 years with our own reserves.” Gutierrez also asked about the East Springs Water Well wall repair. Burkhart said, funding isn’t confirmed for that project yet, but she added, “we have to continue moving quickly on that repair… one way or another we will get that one fixed this coming fiscal year… we are at 60% design engineered.”
“What is a concern is the $2 million that was going to be utilized for the gas meters. That’s what really is of concern. Because we don’t really have enough in reserves to spend $2 million, eat down $300,000, and leave any money left in the fund balance. And so, we cannot move forward with those gas meters until we identify a new funding source… It was estimated that they would utilize fund balance for that project, but at this moment in time, it just cannot sustain it,” shared Burkhart.
Velazquez said: “In order to see what projects could be delayed for the future, I’ll give you one, I think $700,000 out of the water was for a water tank. So that’s not something that’s going to disrupt service, that’s something that can be pushed out. However, in delaying some projects in infrastructure throughout the city of our in-house plan for waterline replacement, in-house projects, the only benefit there would be streets would be able to catch up with the pavement plan. And continue in 2026-2027 with our [water] projects… And that’s all I can state.”
In order to save city employee jobs, the City of Del Rio will have to sacrifice some capital improvement projects that were to be paid utilizing Enterprise Fund Reserves. Those fund reserves are now planned to be transferred to the General Fund to help pay for overhead costs such as salary. Adverse effects of taking money from the bridge, water, wastewater, and gas funds will delay some capital improvement projects.
At the end of the discussion, Burkhart thanked the financial team, Flavio Aguilar, Roxy Soto, and Linda Coones, for “taking on the burden of this budget.” Before closing the meeting, the City Council considered helping to fund an infrastructure project on the Laughlin Air Force base. The City would float $300,000 to Laughlin to help cover costs, month after month, until the City could be reimbursed by a federal grant at the end of the two-year construction period. Burkhart warned the Council: “This year as we move forward, I would ask you to consider the fact that we will be in a cashflow situation, negative situation, where we will be pulling from other funds to possibly have cashflow, throughout the year.”
There are a few important dates coming up regarding the budget finalization. Burkhart said, “we will be informing you in more detail on the 23rd,” at the regular City Council meeting, as to the importance of a balanced budget. She referenced “due diligence calls from creditors” and the need to maintain financial transparency in order to seek loans for city projects in the future. They will be hosting the final Public Hearing on the Budget on Saturday September 27 at 9am. And the final vote to adopt the budget will be held Monday September 29 at 6:30pm at City Council chambers.
SEE FULL BUDGET HERE: City of Del Rio Proposed Budget Fiscal Year 2025-2026
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