Princeton Officials Warn Tough Budget Choices May Be Ahead Despite Strong Financial Position

By R.J. Morales | TX3DNews

PRINCETON, Texas — Princeton city officials said Monday that the city’s finances remain strong, but warned that balancing next year’s budget could require difficult decisions as development-related revenues slow and operating costs continue to rise.

During Monday night’s City Council meeting, Chief Financial Officer Kelly Wilson presented the city’s third-quarter financial and investment report for the fiscal year ending June 30, 2026. The report showed healthy reserves, strong property tax collections, and sales tax revenue exceeding projections, but Wilson cautioned that the General Fund is beginning to face pressure that could make next year’s budget more difficult to balance. The council later unanimously approved the report on a 6-0 vote.

Strong Finances, But Budget Pressures Are Emerging

Wilson reported that Princeton held $268.4 million in cash and investments as of June 30 and had generated $7.2 million in interest earnings this fiscal year. Property tax collections reached 98.96% of the current levy, while sales tax revenue continued to outperform budget projections.

Despite those positive indicators, Wilson said General Fund revenues are running below budget because of slower development activity, reduced permit volumes, and the timing of permit-related revenues and reimbursable services.

Building permit activity averaged 94 permits per month during the third quarter, down from 168 permits per month in the previous quarter. However, Development Services Director Shai Roos told council members the decline did not reflect reduced demand.

“Permits didn’t actually go down. We have not yet issued them,” Roos said.

She explained that the department introduced a more detailed residential review process in April, increasing the time required for each review. Combined with staffing shortages, the changes have left the city with nearly 400 permits awaiting issuance.

To help offset lower-than-expected General Fund revenue, Finance has tightened spending controls, increased oversight of discretionary purchases, strengthened cost recovery efforts, and limited non-essential spending while maintaining core city services.

The report also identified several of the General Fund’s largest expenditures through the third quarter, including about $579,570 in fire department overtime, $915,430 in outsourced engineering services, and $391,291 in legal services. Departments have begun implementing operational changes aimed at reducing those costs.

Council Looks Ahead to Next Year’s Budget

Much of the discussion focused not on Princeton’s current financial condition, but on what the city could face over the next year.

One council member asked Wilson what her outlook was for the city’s finances moving forward.

“So at the pace that we’re going within the general fund, as I mentioned on Friday, we’re seeing a struggle with our basic services as they are today, not for tomorrow even, but as of today,” Wilson said. “The foresight of what we’re seeing, our property tax revenue and our sales tax, it is a struggle to balance the general fund for next year.”

She added that there are “some action items that’s going to be tough for council to make some decisions.”

Council members also discussed how future operating costs could affect planned projects, including parks and the city’s future recreation center.

“We can build lots of things through the I&S rate,” Wilson said, “but then there’s maintaining it, staffing it. So there’s cost obviously involved with that.”

Utility Operations Remain Stable

Wilson reported that the city’s utility operations continue to maintain Princeton’s 120-day working capital reserve despite seasonal fluctuations in water usage. She also said the city’s investment portfolio remains conservative and liquid, with a value of approximately $268.3 million and a yield to maturity of 3.66%. More than 80% of the city’s treasury pool is restricted to specific purposes, including capital projects, roadway impact fees, utility funds, and other designated accounts.

Before the vote, one council member requested additional financial scenarios showing how different property tax rates could affect future General Fund revenue as the city prepares for next year’s budget discussions.

The Princeton City Council unanimously approved the third-quarter budget and investment report on a 6-0 vote.