Stevie Quilo 
The City Council voted to ratify the budget on September 29, 2025. In a split vote, with 3 votes against and 4 votes in favor, the majority ruled. This City Council vote doubles down on their past practices. In lieu of layoffs, the city will rely on enterprise fund reserves to cover general fund revenue deficits, transferring out $1.9 million more than last year. This vote came after multiple warnings from economic advisors about the financial risk associated.
Councilperson Randy Quinones made the motion to adopt “Draft 5” of the budget, Councilperson Tina Martinez seconded. A roll call vote was then taken. Mayor Al Arreola, Councilperson JP Sanchez, Tina Martinez, and Randy Quinones voted in favor; Councilperson James DeReus, Jesus Lopez, and Carmen Gutierrez voted against.
City Manager Burkhart explained the drawbacks of the “Draft 5” budget in detail, right before the vote on September 29. She said: “Utilizing general fund reserves, going from 5 months to 3 months, that’s a one-time fix. And also using enterprise funds to balance on, which also is a one-time fix. And there will be some projects delayed out years, for the enterprise funds, if we go with Draft 5. But again, this is with no reduction in force [no layoffs].”
“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 on September 17.
The City was deciding between two main options to fix the revenue deficit: staff layoffs or enterprise fund transfers. They could reduce overhead costs by cutting city staff salaries through layoffs. Or they could transfer enterprise fund reserves to subsidize overhead costs. Those enterprise fund reserves were planned to be used for important municipal improvement projects, that now will be delayed for several years.
Burkhart said on September 17, “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…” For example, the new water well will be constructed on schedule, but the installation of new waterlines will be delayed.
There is no wiggle room left. The ratified 2025-2026 fiscal year (25-26FY) budget will drain down the city’s accounts to the point where they only have enough cash to cover the costs of their debt repayments and certificates of obligations. The savings accounts will get so low that next year, drawing on the enterprise fund reserves will no longer be an option, and the city will be facing an even larger deficit than before.
Tony Jaso, Executive Vice President at Estrada & Hinojosa of TRB Capital Markets, gave a presentation to City Council on September 23 about their bond ratings. The bond rating directly impacts the “borrowing cost” the city is able to attain when acquiring debt, Jaso said. The higher the rating, the lower the cost of debt the city will incur. Some things that affect the rating are fund balance, how much of a debt burden is being carried by a city, debt repayment history, municipal revenue, liabilities and socioeconomic factors.
Jaso started with the positives. He noted the City had a good history of maintaining fund balance, repayment of loans, and regular practice of conducting audits. He said, “you all do monitor things closely throughout the year, you all allow yourself the flexibility to course correct if things aren’t going as originally planned.”
He then referenced an article published on August 21 about Del Rio’s downgraded bond rating, entitled “Fitch Downgrades Del Rio TX IDR and FO and COs to AA- Outlook Stable.” Jaso said Del Rio’s “rating has been stable for quite some time” but it was a split rating. He said, “they were trading anyways as a AA- because you had 2 ratings of a AA- and you only had one at a AAA, it’s not like there was any trade benefit that was occurring.”
Jaso advised: “They had acknowledged that the city had a very healthy fund balance and had been maintaining that for some time… They understood that from time to time the city would lean on fund balance to sure-up any budgetary shortfalls, however the sustained practice of that, along with the lowered economic activity coming out of covid… That’s what caused them to lower it that one notch. They acknowledge that the city still does have good fund balance, even though you have kind of used that to sure-up the budget shortfalls as of late. It is still carrying a good fund balance, one that is within the acceptable range… But again, it expressed concern that the continuation of this practice could erode that to a precarious level.”
“The continuation of this practice could erode that to a precarious level.” – Jaso
Jaso summarized: “The important take away is, the continual use of the fund balance to sure up any budgetary shortfalls… sustained use of that practice could have the potential to further erode your fund balance and put continual downward pressure on your bond rating.”
Unless the city can exponentially increase the revenue generated by their enterprises (i.e., international bridge, gas, water, wastewater, and refuse) within the next 12-months, or establish a new source of revenue, then they will be looking at even more layoffs and even costlier debt next year. High-cost municipal properties like the San Felipe Springs Golf Course, Paul Poag Theater, and Del Rio Civic Center, could be a source of revenue generation but are not returning profits at this time.
The City has relied upon enterprise fund reserves to supplement the cost of staff salaries and property maintenance for years. The City Council was advised against continuing down this path, because it is contributing to their own financial decline. However, the majority of the City Council refused to consider layoffs, no matter the warnings that were given. But in all likelihood, the layoffs are not being avoided, only delayed.
On September 17, Burkart said: “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.” Burkhart 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 made it seem like they were stuck between a rock and a hard place, they were making tough decisions to solve the budget deficit. Solutions such as asset liquidation, staff layoffs, and comprehensive budget cuts were considered. The deficit was chipped-away from multiple angles, but it was not enough. Drastic measures needed to be taken.
Layoffs, property sales, budget cuts, tax and utility increases. None of those solutions are pretty. With the rising cost of living and decreasing state and federal funding, options are limited. The City Council said they wanted to balance the budget, and balance the needs of city staff with the needs of city residents. Councilmembers were trying to buy time; time for their staff to make other arrangements, and for the City to come up with a less painful solution.
During the various public hearings on the budget, residents and staff expressed concerns regarding the layoffs, saying city services are already slow and city staff are already operating with limited resources. The City of Del Rio is one of the largest employers in town, and layoffs could financially cripple dozens of local families. Other concerns were raised regarding the increased property tax, increased water rates, increased wastewater rates, and increased fines and fees, especially considering its impact on fixed-income senior citizens.
Councilperson Carmen Gutierrez explained why she voted against Draft 5 of the budget. She said: “Just to be clear, since it did pass, this is a temporary no-reduction in force, taking all that money from enterprise funds, that we will not be able to use next year… and we will be reducing our 5 months [reserves] to 3 months, and that will not be able to be used… and so next year we will be in this boat, and we will not be able to save jobs. Unless somebody comes up with all this. So, the employees that are affected need to be aware of that.”
Gutierrez summarized: “Our city needs to have financial stability in order to continue to grow economically and in any other way, we need to have financial stability. We already know that we were downgraded once. We are depleting our reserves from 5 to 3. It is not a permanent fix… And our citizens are already going to be paying higher rates on all the enterprise funds, new fees on new ordinances, higher rates on existing ordinances… and I don’t want to say, ‘when they signed up for it’ because they didn’t really have a choice, but it was not to fund salaries.”
“It is not a permanent fix.” – Gutierrez
On September 29, City Manager Shawna Burkhart presented three options of the budget: Draft 5, 5B, and 6. One option with layoffs, and two without. “Draft 5” was the only version ever put up for vote.
Draft 4B appeared to be Burkhart’s preferred version of a balanced budget and was presented numerous times to the City Council and at public hearings but was never put up for vote. 4B included layoffs for 22 fulltime and 4 parttime employees and would have given staff two weeks’ notice prior to termination. Budget 4B was modified into the now budget Draft 6, which still included layoffs but would have given staff three months’ notice.
Draft 5 and 5B were “no reduction in force” budgets, meaning no layoffs. Draft 5 was balanced by increasing transfers out of the city’s fund reserves, allowing the city to close the fiscal year basically at zero. Alternate Draft 5B was not balanced, and the city would be left with a nearly $2 million revenue deficit but wouldn’t drain their fund reserves so badly.
Draft 5 – Balanced budget, utilizing enterprise funds, leaving a zero balance, and no reduction in force
Draft 5B – Not balancing, leaving a negative balance of $1.9 million, and no reduction in force
Draft 6 – Not balancing, leaving a negative balance of $1.46 million, reduction in force with a 3-month phase-in
All in all, the layoffs would not have actually saved the city very much money for 25-26 FY, due to projected affiliated costs such as increased unemployment insurance. But it would have set the City up for a healthier budget for the 26-27 FY and beyond. Economic advisors suggested that layoffs were a more sustainable and less risky long-term solution, and that relying on enterprise fund reserves is a quick fix that needs to be resolved as soon as possible.
Tony Jaso had advised City Council: “A rule of thumb is they say generally speaking, if a municipal entity can maintain a 25% fund balance of their annual expenditures, that’s at least a minimum, more is always better… because that cushion helps to insulate any sort of entity, or in our case a city, against those sort of unexpected things that come, you know again if there is a horrible weather event that nobody plans for… or if a major employer happens to leave well maybe there’s tax revenue that’s not going to be realized that had been counted on in years past… With those sorts of things happening, it’s nice to always have a nice savings account.”
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