Hagerstown officials propose FY26 budget with 5.5¢ real‑property tax increase to cover public safety, utilities and debt service

HAGERSTOWN, Md. — City staff presented a proposed fiscal year 2026 budget on April 1 that would balance primarily by adding a 5.5‑cent increase to the real property tax rate and other revenue and reserve moves.

The proposal, presented by Scott Niswander, Michelle Hepburn and Brooke Garver, would produce a modeled surplus of $7,900 but relies on the tax increase to generate about $2.2 million in revenue, city staff said. “We were able to get balance for the charter and present to you today this budget that actually has a surplus of $7,900. However to get to that requirement it's going to be necessary that we propose a 5.5¢ real property tax rate increase as part of this budget,” Niswander said.

The tax increase is intended primarily to cover higher public safety spending. Staff said the Hagerstown Police Department budget would rise by about $3.2 million from FY25, with $2.8 million of that attributable to salaries, benefits and overtime tied to negotiated increases and hiring 13 full‑time positions (9 sworn, 4 civilian). If approved in its current form, the budget would fund 100 sworn officers and 25 non‑sworn positions.

Why it matters: the budget sets tax rates and spending that take effect July 1. By charter the council must adopt a budget and tax rates by May 30; staff said the administration plans a public hearing on May 13 and adoption the week of May 20.

Details and other pressures: staff outlined five main cost drivers beyond police hires. Hagerstown Fire Department costs were proposed to rise roughly $569,000 (about 5–6 percent), with $327,000 of that in salaries and overtime. Information technology operating costs are up about $355,000 (22 percent) tied to a new enterprise resource planning system. Debt service rose because of the recently opened Hagerstown Fieldhouse; staff said the fieldhouse increases debt service by about $740,000 over FY25 and that “the debt service on just that specific bond is $1,100,000.”

Staff also highlighted increases driven by health care (about $1.3 million in general fund costs attributed to union contract provisions), and pension/retirement cost growth: police and fire retirement plan costs are expected to rise about 14.5 percent (roughly $306,000 in the general fund) and Maryland State retirement contribution rates will increase to 13.3 percent of base salaries, adding roughly $273,000 to general‑fund costs (about $486,000 systemwide by staff’s estimate).

Enterprise funds and other items: staff warned the electric fund had a negative cash balance of about $700,000 at the time of the presentation, though they said the city can meet obligations through pooled cash and expects improved cash flow after the spring collection period. Water is projected to have a $2.1 million operating deficit in FY26 under current projections; wastewater rates already include a 13 percent increase for FY26 and staff expect to seek MDE loan or bond funds (approximately $10.5 million) for plant and pump station work. Parking debt service for the new third deck of the Hub City garage was reported as about $750,000 annually.

Federal and grant funding: staff said the city received $20.4 million in American Rescue Plan Act (ARPA) funding, has expended about $7.2 million and currently shows about $1.8 million in obligations remaining that staff expect to spend. Community Development Block Grant (CDBG) entitlement amounts are not yet set; staff included roughly $100,000 in the FY26 draft and warned that any reduction would immediately affect public‑service grants to nonprofits administered through CDBG.

Next steps: staff asked the council to hold a public hearing on May 13 to introduce ordinances for the tax rate and the FY26 budget, with adoption planned for May 20. Staff also said individual projects or expenditures above $25,000 will come back to the council for separate approval during the year.

Council reaction: Council members framed the tradeoffs for residents in dollar terms. Councilman Ochsner calculated the effect for an average homeowner (about $1,400 in current city property tax) as roughly $77 a year for a 5.5¢ increase and walked through how that would be allocated across public safety, the Fieldhouse debt and other services. Several council members said public safety retention and recruitment are priorities that justify the proposed increases.

Budget materials: the FY26 proposed budget document and a 51‑page overview are posted on the city website; staff said the full book is about 500 pages. Staff requested council questions over the coming week so the administration can prepare targeted material for upcoming work sessions.