Explainer: The City Budget

This Explainer was written by Kit Anderson and Richard Young.

What is the City Budget?

The city budget is a financial document that helps guide how local government spends money and estimates how much in taxes and other money the city will receive in a given year. In the early spring of every year, the Mayor proposes a budget that reflects their priorities and the requests of their staff. Council then makes changes to that budget to reflect their priorities.

The city cannot spend any money unless it is planned for in the budget. Throughout the year, the city makes frequent budget amendments as they are needed to ensure local government can be responsive to what is needed.

The budget is made up of revenue and appropriations.

Revenue is the money the city receives from taxes, fees, and other sources. The revenue section of the budget gives details about how much money the city receives from each revenue source.
Appropriations are what the city spends its revenue on. This makes up the majority of the budget document itself.

Again, any item that the city wants to spend money on that is not included in the budget requires a budget amendment from council, which requires a supermajority to pass.

Why does the City Budget matter?

The city budget isn't just a bunch of numbers on paper – it's the roadmap for how Lexington works every single day. When you call 911, when you drive on city streets, visit a park, or turn on your water, you're experiencing the budget in action. Just think... the budget funds:

Police officers who respond to emergencies
Firefighters who protect your home
Road crews who fix potholes
Water treatment that keeps your tap water safe

It also determines how much you pay in payroll taxes and what fees you'll encounter throughout the year.

Beyond the practical impacts, the budget is where our community's values meet reality. Every dollar the city spends is a statement about what we prioritize. When we invest more in affordable housing, youth programs, or public transit, we're making choices about the kind of city we want to be. Budget decisions made today determine what kind of community we'll be tomorrow - whether that's investments in infrastructure, economic development, or quality of life initiatives.

Most importantly, you have a voice in this process. Unlike many government processes that feel distant and bureaucratic, the budget process is designed with multiple opportunities for public input. Your participation can genuinely influence how hundreds of millions of dollars are spent in our community. After all, it's your money and your community - you should have a say in how both are managed.

How can you get involved in the City Budget?

Great question! The budget process is some of the most important work that the City of Lexington does, and it’s important to make your voice heard throughout. The best time for residents to get involved in the budget process is in the late winter and early spring of each year. You can see that in the timeline below.

Stay up to date on the budget process - Stay up on what is happening with the city budget through CivicLex. Subscribe to our newsletter and follow us on Instagram or Facebook to stay updated.
Talk to your Councilmembers - Make sure your Councilmembers know about your priorities for the city budget. When you reach out, let them know that you understand the complicated nature of the budget, but want to advocate for your priorities. Find out who your Councilmembers are here.
Check out our budget database - CivicLex creates a budget database every year, to help explore what exactly is being funded in more detail. The database is open to the public and accessible here.

What else do I need to know about the City Budget?

How is the budget structured?

A couple important things to know about the structure of the budget:

Timing: Lexington’s budget does not go by the calendar year – the budget takes place in a Fiscal Year, which runs from July 1 to the end of June in the following year.
Fund types: The city budget has different types of funds: The General Services District Fund encompasses most of the basic services provided to residents. This part of the budget is the most flexible from year to year. Restricted Funds are other funds in the LFUCG budget, aside from the General Services District Fund. These funds are restricted for specific uses as designated by their charter, and have specific revenue (income) streams.

How does the budget get made?

Lexington's budget-making process follows a standard procedure every year.

Step One: Departmental & Division Requests (January - February)
Divisions and Departments within city government file requests for the next year’s appropriations with the Mayor’s office. These requests are usually based on the previous fiscal year’s budget, but also include requests for any new or expanded work.
Step Two: Mayor’s Proposed Budget Address (March-April)
Based on the Division and Departmental requests, the Mayor and staff put together a draft of the budget. This draft includes any priority projects for the Mayor’s Office. It is then presented to council in a public session, usually accompanied by a televised speech on GTV3.
Step Three: Link Sessions (April - May)
After the Mayor’s proposed budget is presented, Urban County Council members meet with Divisions and Departments to review their appropriations included in the budget. These happen in what are called “Links” that consist of groups of 3 council members assigned to the 5 different Division/Department groups. Link meetings are open to the public.
Step Four: Committee of the Whole & Public Comment (May - June)
Once the link meetings are completed, the Council meets in what is called the “Committee of the Whole”. During this public meeting, the council Links present proposed changes, the Mayor’s Office makes late requests, Council members propose their own additions, and the budget goes up for Public Comment.
Step Five: First and Second Readings (June)
Once the Committee of the Whole has happened, the budget is not likely to change, and goes for its Readings before Council. The budget is presented and read to the Council in two Council Meetings, and is then voted upon for passage.

Where does Lexington's revenue come from?

Lexington's budget revenue comes from a variety of sources.

LFUCG’s number one source of revenue is Licenses and Fees, which includes permits, vehicle registration, and most taxes.

Inside Licenses and Fees, Payroll Withholding is the single biggest source of income for the city, and is 56% of general fund revenue.
The top five sources of payroll revenue in Lexington are the University of Kentucky, Fayette County Public Schools, Baptist Health, LFUCG, and Amazon.
After Payroll Withholding, Net Profit Taxes are the second largest revenue stream. And contribute 11% of the General Fund. Many of the largest employers in Lexington are nonprofits, and do not have to pay net profit taxes.

Ad Valorem Taxes, or property taxes, are the next biggest source of revenue, followed by one time funds and income from services provided.

Ad Valorem Taxes, or property taxes, come in at about $28 million a year. However, LFUCG only keeps about $10 million of that - the rest goes to Lextran, FCPS, and the Lexington Public Library. In the 90s, the Library sued LFUCG and received a judgement to receive at least 5% of all property tax collections.

How much does the budget change year to year?

The budget doesn’t typically change in major ways from year-to-year. There are a few reasons for this.

One is that some rules dictate how money must be allocated.
Another is that the city sometimes makes multi-year funding commitments to projects that take a long time.
The biggest reason is that a large part of the city budget is city staff. These staff are hired in departments working on specific issues, and so large swings in the budget would likely require the firing of staff in one place and hiring in another.

LFUCG Budget Resources

CivicLex’s FY 23/24 Budget Guide - Use this guide to learn more about LFUCG’s budget and what it means for the city. You can see a breakdown of the budget by department, learn how to read the raw budget document, and city contacts for questions.
CivicLex’s FY 22/23 Budget Page - Use this page to understand the FY 22/23 LFUCG Budget. It contains our Guide to the Mayor’s Proposed Budget, our Budget Workshop Presentation, updates about the budget process, and more.
CivicLex’s FY 21/22 Budget Guide - Use this guide to learn more about LFUCG’s budget and what it means for the city. You can see a breakdown of the budget by sector, learn how to read the raw budget document, and find contacts for topic - specific questions. This guide is updated with each annual budget.
CivicLex’s FY 21/22 Budget Database - Access CivicLex’s searchable and filterable database of the top line items in the city budget using the platform Airtable. This is what we use to build our budget guide.

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