Mayor proposes one-time $250/$500 health stipend addendum to budget to offset 2025 insurance increases

The mayor proposed an addendum to the city’s FY2026 budget that would give a one-time taxable stipend to employees intended to offset health-cost increases, $500 for public safety staff and $250 for other employees.

The proposal aims to ensure “no employee saw that health insurance cost make their paycheck be less than it was in fiscal year 25,” the mayor said during the finance committee meeting. The mayor said the administration intends the payment to be a single lump sum and to distribute checks around the Christmas season if the council approves the addendum with the budget.

Administration staff described why the stipend is targeted for certain employees. Miss Standridge, staff member, said the pay-plan design for public safety used step movements that in many cases produced raises for most sworn personnel but left some senior employees who had “topped out” without immediate step increases. Miss Herbert, staff member, explained that about 146 public‑safety employees were identified as potentially seeing health‑cost increases that would outpace step or cost‑of‑living adjustments. The mayor and staff said the stipend is intended to be broader than just those employees to avoid morale concerns among other lower‑paid crew and custodial workers.

City staff estimated the fiscal cost of the stipend program would reduce the general fund contingency; the mayor said the general fund contingency would fall to roughly $713,000 if the council adopts the recommendation. Staff also said the tourism capital fund would pay a previously discussed funding agreement and that smaller funds (water and sewer) would see a comparatively small effect. Staff cautioned the stipend will be taxed as regular wages and will not fully make every topped‑out public‑safety employee whole; for example, one senior public‑safety employee with the highest insurance plan would still face a remaining annual increase of slightly more than $50 after the $500 stipend.

Discussion at the committee included questions about why the disparity occurred and whether the issue would recur. The mayor and staff traced the cause to the structure of the public‑safety pay plan adopted in fiscal 2022, which emphasized step movement (2.5% steps) for public safety rather than larger COLA adjustments. Staff also said an upcoming pension plan change (transition to RSA) will reduce employee pension withholding for police and fire and should increase take‑home pay beginning Oct. 1, which administration staff said reduces the likelihood the same stipend issue will recur at the same scale.

The committee discussed whether the stipend could or should be paid from the Elevate (sales tax) fund for the portion that benefits public safety, but staff said they did not think that was necessary. The committee discussed implementation timing, taxation, and legal review; the mayor asked Mr. Holmes to confirm the legality under local and state law. The administration suggested delivering the stipend as a lump sum and advised the stipend would be treated as regular earnings for tax purposes.

The committee did not record a formal vote on the addendum during the meeting; staff said the administration plans to include the addendum for council consideration with the budget package next week.