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Cary staff presents balanced FY2025-26 budget and asks board whether to continue local grocery tax
Summary
Staff presented a balanced fiscal 2025-26 budget but warned the state’s elimination of the grocery tax will reduce local revenues. Officials asked the board whether to continue the tax locally and whether to pursue a non-home-rule 1% sales tax; trustees expressed informal support but took no formal vote.
Village of Cary officials presented a balanced fiscal year 2025-26 budget on March 15 and asked the board to give direction on whether to continue a local grocery tax after state changes eliminate the existing grocery tax on Jan. 1, 2026.
The question matters because staff estimated the state action would reduce Cary’s annual revenues by roughly $600,000, and the village is accounting for about $200,000 of that reduction in its FY26 projections. Administrator Morimoto told trustees the elimination is a “significant impact” and said staff needs direction so it can finalize revenue estimates and capital transfers.
If the board wants the grocery tax to continue as a local levy, staff said the village must act in time to make the Department of Revenue transition seamless; paperwork generally must be in place several months prior to the start of the calendar year. Officials also discussed a separate option: a non-home-rule 1% general sales tax that, if adopted, could produce an estimated $750,000 per year for capital and equipment needs.
Why it matters: Cary’s FY25 projections show an unassigned general fund balance of about $6.3 million (approximately 56 percent of operating expenditures). Staff proposed using part of that balance to keep FY26 balanced while seeking a sustainable revenue source for capital projects and vehicle/equipment replacement. Without replacement revenues, staff warned, transfers to the capital fund will shrink and some capital work would be deferred.
Board feedback: Trustees spoke in favor of keeping the grocery tax in place locally. Trustee Dudek said continued communication to residents will be important; Trustee Stefani and Trustee Weinheimer also voiced support. Trustee Walrath, who was absent, communicated support for both continuing the grocery tax and pursuing the 1% general sales tax. No formal motion or vote was taken during the workshop; staff characterized the exchange as a request for direction rather than an adoption of policy.
Details staff highlighted: the grocery-tax elimination is a recurring, not one-time, revenue loss. Staff said state formulas and reporting make precise forecasting difficult, so the village prefers clarity in advance of the tax’s removal to avoid relying on reserve balances in future years.
What’s next: Staff asked for direction on (1) whether the board wants the village to continue the grocery tax locally and (2) whether to pursue a non-home-rule general sales tax. Trustees signaled informal support at the workshop; staff will return with next steps for board consideration and with timelines for any ordinance or referendum steps required to meet state processing deadlines.
The presentation also reiterated the village’s current budget schedule: a tentative final budget is expected at the board’s first April meeting.
Ending: No ordinance was introduced or adopted at the March 15 workshop. Staff will incorporate board feedback into the formal budget documents and return with detailed options and implementation timelines for any proposed local tax continuation or new sales-tax proposal.
