Lexington’s finance director told City Council on the evening of the meeting that the city is projecting a near–seven‑figure surplus for fiscal 2025 and staff are recommending temporary freezes and delays in FY26 spending to provide an early warning buffer. “The projected surplus is nearing 7 figures,” Finance Director Jennifer Veil said.

Veil said interest earnings, a larger than budgeted fire and rescue joint services payment from the county, higher-than-expected revenue sharing, and stronger building permit receipts are the main contributors to the FY25 surplus. “Interest earnings beat budget by 292,000. Our fire and rescue joint services agreement was over budget, 137,000… revenue sharing payment was also above budget at 125,000, and building permits were ahead of budget by 104,000,” Veil said.

City Manager Tom Carroll and Veil told council that FY26 is less certain: sales tax is down about 4.1 percent from the same period last year, lodging tax collections are down roughly 30 percent for the year-to-date, and broader economic signals warrant caution. To preserve flexibility, staff identified about $500,000 in one-year holds and proposed actions to be revisited after the new year or sooner if conditions change.

Key proposed holds and directions were: delay approximately $230,000 in vehicle and equipment purchases supported by the general fund (the general fund’s planned $200,000 equipment fund contribution would be withheld for now); put a hold on roughly $100,000 of planned work at Jordan’s Point Park (work already started will continue); and ask the three largest cost centers — public works, fire and rescue, and police — to each find about $33,000 of non‑vacancy savings. Veil said staff explicitly asked departments not to count vacancy savings toward the $33,000 each because some vacancy savings will be needed for ongoing searches and other expenditures.

Veil also described recent, realized savings: a roughly $100,000 net savings from changes and employee education on health insurance plan contributions and smaller savings in the utility fund and central dispatch. She noted a transient occupancy tax change: an extra 1 percent that had been sent to the horse center was capped at $61,000 and will now remain with the city to support Main Street Lexington; that frees up an equivalent amount in the general fund that had been budgeted for Main Street.

Carroll and Veil said they intend to revisit the freezes “just after the new year,” but added they would reassess earlier if conditions materially change. Council members asked for more detail on the timing and which line items would be affected; Veil said she and department heads will return with specifics and that auditors will complete FY25 field work starting the following Monday.

The presentation also noted a potential one‑time reimbursement: staff told council that Rebecca Walters and Aaron Greg may propose their board reimburse the city roughly $100,000 for a school bus purchase.

Why it matters: the FY25 surplus relieves an identified FY25 shortfall on the city hall project without new borrowing, but staff and council framed FY26 actions as prudent, time‑limited measures to avoid committing funds before economic trends are clearer. Council expressed support for early action and asked staff to supply follow‑up specifics and timing.

Less critical details: Veil emphasized the FY25 figures are preliminary pending final entries and the auditors’ field work; dollar figures cited were from her slide presentation and described as high‑level, not yet final.