The National City Council voted unanimously last week to approve a three-year, roughly $250,000 contract with Tyler Technologies for an artificial intelligence-powered budgeting tool, two weeks after members demanded more information about its cost and reliability.
Read more New data show a rise in immigration arrests across San Diego
The vote came the same night the council adopted a broader financial plan intended to close a widening structural deficit that City Manager Doug Schulze has warned could push the city toward insolvency.
The council first considered the Priority Based Budgeting software Aug. 18, when members questioned its price tag, its reliance on artificial intelligence and the absence of a competitive bidding process. Rather than vote that night, the council unanimously directed Schulze to return with an expanded report detailing the program’s costs, benefits, limitations and contract terms.
Schulze told the council Tuesday the agreement carries an initial payment of $14,000, followed by $80,000 annually over three years. He said the purchase was sole-sourced because no comparable product exists for municipal governments.
“There is no other company that has a program that is set up for municipal government like this,” Schulze said. “This is unique.”
Mayor Ron Morrison defended the expense, saying the software would give staff access to comparative data from other municipalities that is otherwise difficult and time-consuming to obtain.
“This is not programming, it’s not telling you what you have to do,” Morrison said. “It’s giving you the information … based on empirical data that’s being brought to us from all kinds of different directions.”
During public comment, resident and mayoral candidate Jacob Castrojon asked how the software’s underlying AI model was trained and whether it might carry embedded biases. Resident Ed Nieto said he supported the purchase but urged caution.
“There’s a lot of risk in relying on a software that we don’t know about, and we’re taking Doug’s word for it,” said Nieto, who is also running for the District 3 council seat. “There’s this saying about ‘trust, but verify.’”
Schulze said the tool uses a “closed” AI system, distinct from general-purpose platforms such as ChatGPT or Gemini, that will sort the city’s financial line items into an inventory of programs using the city’s adopted fiscal year 2027 budget. City staff will then review that inventory for accuracy before the software begins generating priority scores intended to guide the fiscal year 2028 budget.
Read more A whiplash election year enters its final stretch as Trump holds wild cards
The vote came as the council separately adopted a five-year Business and Fiscal Sustainability Plan, presented by Schulze, aimed at eliminating the city’s structural deficit within three years without dropping reserves below policy minimums. Schulze said the city’s unassigned general fund reserves, which stood near $37 million in fiscal year 2024, are projected to fall to roughly $252,000 by the end of fiscal year 2027 without intervention.
Schulze’s presentation cited the city’s heavy reliance on sales tax, which makes up 41% of general fund revenue, as a key vulnerability. He said staff have already identified about $2 million in savings through position freezes, organizational right-sizing and shifting costs to other funds.
The plan calls for diversifying revenue so no single source exceeds one-third of unrestricted revenue by 2031, in part through redevelopment of 150 acres of underused city-owned tidelands.
Several council members pressed Schulze for more specifics, including projected revenue from planned hotel development on Bay Marina parcels and a timeline for completing an overdue audit of fiscal year 2025 financial statements.
Schulze said such revenue projections remain too speculative to include, telling the council that development estimates “may not even happen” if a developer withdraws or a project stalls for whatever reason.
Morrison echoed that caution, recalling how the city once counted on revenue from a nearby commercial project, dating to 2004, that still has not broken ground. He said the same discipline must apply to the waterfront redevelopment now moving through the port’s approval process.
“We can vote tonight to do some spending and we can spend it all tomorrow,” Morrison said. “We can vote to raise the revenues, take care of it, but it may take years or decades to get that revenue to match it.”
Both the Tyler Technologies contract and the fiscal sustainability plan passed unanimously.
Read more One-cent sales tax measure, two council seats on Santee ballot
