Eugene financial forecast shows reserves slipping as revenues weaken, costs rise

The city of Eugene’s latest financial projections show reserves dipping due to declining revenues and rising costs. 

Leaders with the city’s finance division on Wednesday, Dec. 3, presented an updated financial forecast and the 2025-27 supplemental budget to the city’s Budget Committee before it heads to the City Council for adoption on Monday.

The supplemental budget allows for changes — often reflecting grant fluctuations, audits and recent council direction — to the two-year budget adopted in June, when the city increased the stormwater fee to narrow its $11.5 million general fund shortfall and prevent cuts.

Eugene’s budget remains balanced through its current cycle, but the city would need to reduce spending in its general fund by $2.2 million per year beginning in 2027 to keep its savings on target, Senior Financial Analyst Maurizio Bottalico said Wednesday.

“Meaningful progress was made to increase general fund reserves nearly to the target level after years of running well below target coming out of the pandemic,” he told the budget committee, which includes all eight city councilors as well as eight citizens. “However, a structural imbalance still exists.”

Revenues fall

Much of Eugene’s tightening forecast stems from declining revenues. The annual growth rates of property taxes, the city’s largest revenue source, came in at 3.8% for fiscal year 2026. That was the same as the year prior but less than the projected 4% growth rate.

But Bottalico said the growth rate would have been even lower — 3.4% and 3.5% — over the past two years except for two significant events that increased the rate: last year’s frozen base increase and, this year, the expiration of the Multi-Unit Property Tax Exemption for the Hayward, a student apartment complex downtown, formerly known as 13th and Olive, and before that as Capstone.

The city also slightly dropped its long-term projection for annual assessed property value growth, from 3.6% to 3.5%, and lowered its assumed property tax collection rate from 95.6% to 95.5%.

Those changes resulted in a decrease of $4.3 million in property tax revenue over the six-year forecast period, compared to the budget adopted in June.

“While these may sound like small changes, the resulting impact on projected property tax revenue is significant,” Bottalico said.

Other revenues, including from cable franchise fees and local marijuana taxes, are also expected to be lower than initially projected.

Staff also shared a list of Eugene’s top 10 taxpayers:

1. Comcast
2. Shepard Investment Group
3. Verizon
4. 13th and Olive apartments owner 
5. McKay Investment Co.
6. Northwest Natural Gas
7. Valley River Center
8. Chase Village
9. Standard at Eugene 
10. Weyerhaeuser Co.

Inflation increases costs

Higher-than-expected inflation is driving added costs for the city.

Eugene officials now project spending more than $1 million extra per year out of the general fund on an ongoing basis, Bottalico said. If inflation runs a full percentage point higher than assumed in each year of the forecast, he added, Eugene’s general fund would face $17 million in additional costs over six years.

“Lingering price pressures remain and are proving persistent as the economy continues to face uncertainty about future inflation impacts in relation to events happening at the federal level,” Bottalico said.

Using funding from the supplemental budget, Eugene plans to contribute $8 million into a Public Employees Retirement System Employer Incentive Fund — also known as a PERS side account — to lower its pension costs over the next six years, starting Jan. 1. The account will receive a $2 million match from the state.

PERS is the state pension system for government employees. Public employers make large deposits into the system, the system invests the money, and earnings from the account are used to offset the city’s pension rates.

“About half of the city’s PERS costs are incurred in the general fund, and this investment and the resulting rate reduction reduces PERS costs in the general fund by about $1 million per year over the forecast period,” he said.

Reserves fall short of target

Eugene’s general fund savings account, the city’s “financial cushion” that allows it to weather unexpected events and avoid cutting services, aims to save 4% of biennial expenses, or about $17 million per biennium on average.

The trajectory of the reserves given updated projections is 3.6%, trending downward due to reduced revenues and increased expenditures, Bottalico said. 

The supplemental budget includes nearly $1.6 million to transfer into the city’s reserves, which Eugene Chief Financial Officer Twylla Miller called a “prudent action” given economic uncertainties.

Looking ahead

The City Council will vote on whether to adopt the budget Monday. 

The city’s Technical Advisory Group on Fiscal Stability will also present an overview of draft recommendations to the council at a work session before the regular meeting on Monday, with a final report expected in February.

Those findings are expected to help shape decisions for the next biennial budget. The next supplemental budget will come in June.