Council wrestles with mill-levy options; directs staff to find cuts and moves Project Grad funding to drug-and-alcohol fund

City finance staff presented an overview of the proposed 2026 budget and five‑year financial forecast and recommended the council consider whether to exceed the revenue neutral rate and set a public hearing. Matt (finance staff) told the council the city's target General Fund balance is 30% of expenditures; the fund balance was about 40% at the end of 2024, is projected at 33% at the end of 2026 and falls toward the target in the forecast years.

Why it matters: the council must decide whether to capture assessed valuation growth by keeping a flat mill rate, or to lower the mill rate (for example by the revenue neutral rate) and accept lower future General Fund balances. Either outcome has trade-offs for service levels, capital capacity and longer‑term tax requirements.

Matt walked the council through scenarios: holding the mill levy flat would keep 2026 fund balance near 33%; using the revenue neutral rate would lower the 2026 balance to about 30% and create a larger decline over five years. Staff estimated a 7.2% preliminary assessed‑valuation increase (the city said some valuation is under appeal), and showed a typical Gardner single‑family house (appraised at about $345,000 for the analysis) would face a roughly $3.48 per month tax increase with a flat mill rate (the presentation said the revenue‑neutral adjustment would move the mill rate down by about 1.213 mills under the modeling assumptions).

Council debate focused on taxpayer impacts and timing. Councilmember Steve pressed for immediate relief to homeowners and proposed cutting the mill by at least one quarter mill for both the General Fund and the bond and interest fund, saying, "we need to take a haircut of at least a quarter mil." Other councilmembers warned that cutting now would accelerate the decline in fund balance and could require larger increases later; one councilmember said the General Fund could fall below the 30% target within two years even if the council "held the line."

Direction from the meeting: the council asked staff to identify about $93,000 in reductions (council leadership agreed to work with staff on line‑by‑line options and return with proposals), and instructed the city attorney and administrator to prepare a resolution to exceed the revenue neutral rate for the July 7 agenda with the council able to set the exact number at that meeting. Matt said public hearings and the approval schedule would follow depending on the chosen mill‑levy path.

Project Grad and Special Alcohol and Drug Fund: staff recommended the council move funding for Project Grad out of the General Fund and into the Special Alcohol and Drug Fund because the latter had an available fund balance. Matt reported the fund ended 2024 with about $233,000 and is projected to end 2025 at about $280,000; annual revenue for the fund is about $86,000. Council discussion focused on program purpose and scale; after discussion the council expressed consensus to move the Project Grad appropriation to the Special Alcohol and Drug Fund at $3,000 for the coming year.

Economic development and transient guest tax: Matt also reviewed the Economic Development/Transient Guest Tax fund, which ended 2024 with about $645,000, projects 2025 at $653,000, and receives roughly $373,000 a year in revenue versus projected expenditures of about $347,000; council discussed using those funds for retail recruitment and several one‑time programs.

Ending: council members directed staff to return with specific reduction options before the July 7 resolution and signaled interest in both protecting seniors on fixed incomes and continuing commercial recruitment to broaden the tax base.