City manager proposes $956 million FY 2026 operating budget, $2.08 billion CIP with no tax rate increase

Alexandria City Manager James Perjean on Feb. 25 unveiled a proposed $956,000,000 operating budget for fiscal 2026 and a $2.08 billion 10-year capital improvement program, telling the City Council the plan does not include a tax-rate increase.

"The proposed budget does not include a tax rate increase," Perjean said during a presentation that framed the package as a cautious plan to maintain services while preparing for economic uncertainty at the federal level.

Why it matters: The proposal preserves city priorities including sustained investment in Alexandria City Public Schools (ACPS), housing, public safety and employee retention while highlighting the city’s imbalance between residential and commercial tax bases. Perjean told the council the package aims to protect the city’s AAA bond rating and to leave resources available if federal grants or regional economic conditions change.

Key details - Operating budget: $956,000,000 (about a 3.1% increase over the prior year as presented). - 10-year CIP: $2.08 billion (the manager said the FY26 CIP is lower than last year’s approved 10-year plan, reflecting project reprioritizations). - Schools: The proposal includes roughly $329,000,000 for ACPS (approximately $281 million operating transfer and $48 million debt service). The school board requested a larger increase; Perjean said fully funding that request would require additional cuts elsewhere or a tax-rate increase. - Housing: A near $30,000,000 allocation across operating and capital to support affordable housing supply, rehabs and eviction prevention. - Public safety: The proposed budget includes about $218,000,000 across public safety units and funds two positions to stand up a pharmacy facility tied to changed medical/clinical requirements in EMS response. - Staffing: The proposal adds nine new positions and eliminates seven vacant positions; Perjean said the net staffing change is small. - Fees and rates: No change to the real estate or personal property tax rates; modest increases to certain user fees (recreation rentals, short-term rental registration fees, parking adjustments). Stormwater fee increases continue as previously scheduled. - Household impact: Using the manager’s averages, the presentation estimated an approximate increase of $37 per month for an average single-family home, $22 per month for an average condominium and an overall average of about $29 per month; the manager noted median household impact would be lower. - Contingency and risk: The manager proposed $3,000,000 reserved for true emergencies and $1,000,000 assigned for potential loss of grant funding.

Council reaction and context Council members pressed for detail on near-term and long-term fiscal risks and on implementation steps. Councilmember McPike praised the focus on preserving the city’s credit rating and said a stable rating gives future councils flexibility. "The best thing that this council can provide to the future of Alexandria isn't necessarily the new city hall ... it's the credit rating," McPike said, urging caution around borrowing plans.

Vice Mayor Bagley and other council members asked how the manager’s team will translate summit and strategic economic-development outcomes into budget-ready actions, and whether proposed investments would position the city to attract commercial growth that can reduce residential tax pressure.

Perjean underscored that the city’s revenue picture depends heavily on property tax, noting the residential portion of Alexandria’s taxable base continues to grow faster than the commercial base. He said the imbalance — roughly 82% residential vs. 18% commercial if multifamily is counted as residential — means commercial growth is essential to relieve residential tax burdens.

Budget priorities and trade-offs Perjean said departmental budget work included both additions and reductions, citing about $32 million in base-budget reductions across five years and nearly $6.4 million in reductions included in the FY26 proposal. He described the criteria used to evaluate add requests: alignment with council priorities, mandated requirements, infrastructure maintenance, public safety and sustaining vital services.

The manager identified major priorities funded in the proposal: youth services and schools (including after-school programming and transportation), employee attraction and retention (a 1% cost-of-living adjustment and funding for merit steps and collective bargaining commitments), housing investments, targeted economic development investments and continued support for nonprofit partners.

Next steps and timeline Perjean presented a calendar that leads to council deliberations and an add/delete process; the manager said the council’s adoption target is in April. Councilmembers may submit add/delete proposals that must be balanced and carry cosponsors. Public hearings, work sessions and additional presentations are scheduled in the coming weeks.

What the manager highlighted as risks Perjean listed federal funding uncertainty, potential grant losses, projected increases in debt service in later years, and inflationary pressures as principal fiscal risks. He said staff would continue monitoring conditions and coordinating with regional and federal partners.

Ending note Perjean closed by thanking the budget team and staff who prepared the presentation and video. Council members and staff signaled the start of a months-long review period during which they will evaluate the proposal, hold public hearings and consider amendments.