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Auburn City Manager Jeff Dygert described it as "a significant budget gap." City Comptroller Mary Beth Leeson noted that it includes a 2% tax levy increase, which will generate $550,000 more in revenue.

"Things are a little tough," Leeson said.

Adding to the budget challenge is the city's inability to use its fund balance to erase the deficit. When the $47.5 million 2024-25 budget was approved, city officials estimated the remaining fund balance was more than $5.4 million — a sizable amount, but not enough to close the gap in the 2025-26 preliminary budget.

Leeson will be presenting a fund balance policy to the City Council. She also wants to develop multi-year financial plans.

The factors contributing to the budget challenges include contractual obligations and increased costs. Mike Talbot, the city's superintendent of public works, presented his department's proposed budget and most line items increased from year to year, largely due to labor and supply costs.

Stephen Selvek, the city's director of planning and economic development, adjusted his department's proposal in recognition of the budget challenges. His original plan included $360,000 for demolitions — a line item that would be used to cover costs associated with tearing down dilapidated buildings. But he zeroed out that line in his proposed budget.

The city's engineering department proposed a budget that is 2.6% less than the current plan, mostly due to decreased operating expenses. Scott McIntyre, who heads the department, explained they partially funded an engineering assessment for the city's dams out of their operating budget. That was a one-time expense, so it's not factored into the 2025-26 plan.

Leeson told the council they asked departments to provide reasonable budget proposals that maintain services the community expects. City officials will continue working with departments ahead of the April 24 council meeting, when Dygert and Leeson plan to present options for closing the budget gap.

The city's budget plans will be affected by what happens with the state budget. Gov. Kathy Hochul and state legislative leaders are continuing negotiations, but an agreement has not been reached on the 2025-26 state budget.

One area of concern for the city's leadership is state aid. Auburn receives more than $4.9 million in unrestricted aid, but this level has not been raised in 16 years. Last year, the state provided temporary assistance to localities, including $578,000 for Auburn. Hochul kept that funding in her 2025-26 budget proposal.

Auburn Mayor Jimmy Giannettino said they have collaborated with other cities in the region to push for more state aid. Every city they are working with, he said, is facing the same budget challenges.

Giannettino also sought to allay concerns about the city's budget situation. There is usually a "pretty big" gap, he said, when they start the budget process. As they work to close the deficit, he said it's important to "do it in a way that's respectful to our workforce," while ensuring the city can provide vital services.

"We will get through this together," Giannettino said.

The City Council will hear more department presentations this month. A revised balanced budget will be presented by Dygert on May 8 after councilors submit their input.

A public hearing on the proposed 2025-26 budget will be held at 5 p.m. Thursday, May 22, at Memorial City Hall. The City Council is scheduled to vote on the final budget at its June 12 meeting.