Hagerstown council confronts $6 million FY2026 gap, weighs 5.5‑cent tax increase as events and state law changes complicate balance

HAGERSTOWN, Md. — City staff and council members said at a May 6 work session that the proposed FY2026 general fund budget faces roughly a $6 million shortfall and that, absent additional growth or cuts, the gap would require a roughly 5.5‑cent property tax increase — an amount council members and staff estimated would add about $110 to the annual tax bill for the average homeowner.

The shortfall was driven by higher health insurance costs, wage and pension increases in public safety, and lower one‑time capital funding, officials said. Councilmember Alshar, who led the budget breakdown during the session, said “that means about $110 more on my taxes next year.”

Why this matters: The general fund covers most city operations, and officials said property tax revenue makes up a majority of general fund income. Council members said public safety, parks and events, and capital projects are central to the city’s service level and political priorities, forcing tradeoffs between recurring costs and one‑time spending.

City staff and councilors described the budget math and options. Councilmember Alshar outlined the major drivers: roughly $1.5 million added for rising employee health premiums; roughly $3.8 million in agreed base‑wage increases concentrated in police and fire; about a 14% increase in pension costs for police and fire; and a drop in the capital improvement program from about $30 million last year to roughly $14 million in the proposed FY2026 plan. He said the city planned to use about $4.1 million in one‑time sources this year (bond proceeds and fund balance) to moderate the tax rate impact.

“Roughly, we’re getting $2,000,000 in growth. We’re getting about $2,000,000 in changes and assessments. And so we’re short about $2,000,000 or about 1.7. If you take that 1.7, that’s about the 5 and a half cent tax increase,” Councilmember Alshar said, describing the council’s revenue options.

Events, Invest Hagerstown and parking funds: Staff and council discussed cutting discretionary line items to avoid a tax increase but repeatedly noted the limits of one‑time savings. The community events budget totals $361,400; staff said about $325,000 of hotel‑motel revenue and some grants currently help offset event costs. Brittany (staff present for community engagement) warned that eliminating events “will completely eliminate any momentum that has been built” for downtown programming and said many outside organizations rely on the city’s event sponsorships; she added that cancelling events would affect parks and recreation and downtown small businesses.

Invest Hagerstown — a homeownership and economic investment program that council members noted is a roughly $1 million line item — was discussed as a potential temporary reduction, but members cautioned that pausing investments could enlarge next year’s deficit and erode program momentum. Councilmember Alshar said freezing Invest Hagerstown for a year would save about 2.5 cents but increase the structural gap in the following year.

The parking fund was another point of concern: staff projected about a $650,000 operating shortfall next year. The fund currently holds about $1 million in reserves that staff said could be used for one or two years but not as a long‑term fix.

State law change and assessed value loss: Councilmember Alshar said a recently enacted state legislative change — identified in the meeting as Senate Bill 596 — altered the local fiscal picture by making one major proposed private development (the stadium/music venue discussed at the state level) fully tax‑exempt rather than eligible for a negotiated, phased payment‑in‑lieu‑of‑taxes. Alshar estimated the city will lose about $375,000 in revenue from that change and said the loss equates to roughly a quarter‑to‑a‑penny on the tax rate; he raised it as an unanticipated “elephant in the room” that the city must absorb in FY2026.

Public safety and personnel: Multiple council members and staff emphasized that recent decisions to increase police and fire staffing and wages drive a substantial share of the recurring cost increases. Staff noted an anticipated addition of positions and salaries that together increase recurring public safety payroll and benefits costs; one council comment said police salary and benefit increases amount to roughly $2.8 million in this budget proposal. Councilors repeatedly framed public safety as a community priority but also the largest budgetary pressure.

Process and next steps: Michelle Hepburn, the staff presenter, reminded the council that legal notices and the ordinance text for the proposed budget and proposed tax rate will be included in next week’s packet and that the formal introduction will proceed as advertised; the public hearing is scheduled for the next meeting. Council members asked staff to return with specific line‑item cut proposals and clarifications (for example, how grant funds and hotel‑motel revenues are applied to events) and to provide a more concrete list of possible one‑time reductions versus recurring savings. Several members asked that any recommended cuts be presented publicly prior to the hearing.

Council direction and outcome at the session: Councilors discussed eliminating events as an initial, visible cut; several members opposed removing downtown events because of tourism and quality‑of‑life concerns. After discussion the council instructed staff to prepare options and did not adopt specific cuts or a final tax rate at the work session. Staff said they would return with recommended reductions and clarified estimates in advance of the public hearing. The meeting record shows no final vote on the budget at the May 6 work session.

What to watch next: Staff will present revised options and any proposed ordinance introductions at the next public hearing packet. The council must introduce the budget ordinance as advertised before the statutory adoption window; staff noted that delaying introduction would compress the adoption schedule.

Details and numbers mentioned during the work session (attributed where speakers stated them): Councilmember Alshar — ~$1.5 million increase for health premiums; ~$3.8 million total in base‑wage increases concentrated in police and fire; city CIP cut from about $30 million to ~$14 million; estimated $6 million general‑fund gap; $4.1 million in one‑time sources used to soften the increase; Invest Hagerstown approximately $1 million; events budget $361,400 with ~$325,000 hotel‑motel revenue offset; parking fund projected $650,000 shortfall with ~$1 million in reserves; estimated lost local revenue from SB596 about $375,000.

No formal ordinance or budget adoption occurred at the work session; the council directed staff to return with detailed cut options and clarified revenue assumptions for the public hearing.

Ending: The council scheduled further budget discussion and the public hearing in the coming week; staff and council signaled that any final decision on the tax rate and cuts will be taken at or following the advertised hearing.