(TNS) — National City officials are weighing whether an artificial intelligence-driven budgeting tool could help stave off the financial collapse threatening the city, after City Manager Doug Schulze warned this month the city could face insolvency by 2030 without intervention.
The City Council on Tuesday heard a presentation from Tyler Technologies representative Chris Fabian on the company’s Priority Based Budgeting software, which uses machine learning to translate line-item budget data into a comprehensive directory of the city’s programs in order to identify cost saving and streamlining opportunities.
The council did not vote to approve the $250,000, three-year contract Tuesday. Instead, members voted unanimously to direct Schulze to return at the council’s first September meeting with an expanded report detailing the program’s costs, expected benefits, limitations and contract terms.
The vote followed roughly an hour of council questions and public comment expressing skepticism about the proposal’s cost, its reliance on artificial intelligence and the absence of a direct community outreach process to help set budget priorities.
Councilmember Jose Rodriguez asked Fabian a series of pointed questions about the program’s use of artificial intelligence, adding his concerns about “how little guard rails there are” for the technology.
“There’s a lot of concerns within our community about artificial intelligence and what it means for us,” Rodriguez said.
Fabian responded that the software uses a “RAG architecture,” or retrieval augmented generation, which he said keeps city data in a protected database that is never shared with outside large language models such as OpenAI, Gemini or Anthropic.
He said the city’s data is analyzed against Tyler’s database of case studies from other jurisdictions to generate tailored recommendations, but that the information itself “is not as if you took your budget and went to a large language model again like OpenAI and posted it there.”
Councilmember Luz Molina said she was “not comfortable moving this forward tonight” without more information, including firm contract language.
“The positives, I like that this is an independent outside look at our organization, looking at it from a program-based (perspective),” she said. “But the negatives at this point, what’s holding me back, is the cost. The quarter of a million (price) is just a high cost, so I just don’t want to get locked in for that long.”
Mayor Ron Morrison offered a more favorable view of the proposal, saying it would give the city real-time data to reassess long-standing practices rather than relying on assumptions or political bias. He said he trusted Schulze’s judgment on the tool, given Schulze’s experience using it in a previous city.
“I do trust in the city manager and the experience that he’s had with it and what we’ve seen with other communities,” Morrison said. “But it is a way to look at resizing and rethinking, which we desperately need to do.”
Fabian said organizations that implement the software for resource optimization “routinely save 10% of the amount of money that they analyze,” and estimated potential savings of $8.8 million for National City based on publicly available data. He cited Collier County, Fla., where the tool identified an estimated $87 million to $131 million in savings and revenue opportunities within 90 days.
Councilmember Marcus Bush questioned the return on investment of adopting the software, citing the $250,000 cost and adding he would prefer a contract shorter than three years.
“I’m interested in talking to my colleagues back and forth about a smaller (timeframe), like doing this as a pilot for one year, six months, or something like that,” Bush said.
Resident Cynthia Fuller Quinones told the council during public comment that other California cities in fiscal crisis have recovered without the expense of priority-based budgeting software, pointing to alternatives such as participatory budgeting — a democratic process that lets residents directly decide how to spend a portion of a public budget, rather than leaving those decisions entirely to elected officials or staff.
Edward Nieto, a resident and District 3 City Council candidate, told the council he supported the presentation but felt rushed into weighing in on a $250,000 decision with only a one-page staff report and a brief discussion window. He questioned whether the software would duplicate functions of the city’s still-unfinished Munis ERP system — a software used to manage core financial and administrative operations — and asked whether Tyler Technologies could guarantee prompt implementation.
“It’s a shame that we have to base a $250,000 decision on roughly a 10-minute discussion,” Nieto said. “It took us how many years? Three years to put the [ERP] system [in] and it’s still not complete.”
The presentation came after Schulze told the council last week the city’s deficit could grow from $13 million this fiscal year to $30 million by 2029, with insolvency possible by 2030. That warning coincided with a 3-2 council vote to pull a business license tax measure, projected to generate $7.1 million annually, from the November ballot amid business community opposition.
Schulze has said staff identified $3 million to $4 million in savings achievable without significantly affecting services, and that his office plans to present a broader fiscal sustainability plan to the council in September.
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