Montpelier council approves 2026 budget, puts 1% local-option sales tax on March ballot with earmarks for Montpelier Live and infrastructure

The Montpelier City Council voted Monday to send a 1% local-option sales tax question to voters and to place the city’s fiscal 2026 budget on the March town-meeting ballot, while also adding a $2.2 million bond question for a replacement aerial ladder fire truck.

City Manager Bill said the council and staff faced “a 24% tax increase” if they had fully funded every restored position and built-in cost increases, and that the adopted package reflects cuts and choices made to hold the municipal tax increase to 3.52% for city operations (4.77% including ballot items). “When we started the budget … we would have needed a 24% tax increase to fund all of that,” Bill said during the presentation.

The sales-tax question will appear on the March ballot as a 1% local-option tax “as allowed by Vermont law.” Councilors amended the question before voting to specify how initial proceeds would be used in fiscal 2026: the first $50,000 would go to Montpelier Live and the next $100,000 would be allocated to additional infrastructure projects. The council also approved a separate, binding council commitment that if the local-option tax fails to pass, the city will provide $39,100 to Montpelier Live from other city funds for fiscal 2026.

Councilors and staff framed the package as an attempt to balance core services, capital needs and affordability. Finance presenter Ron Smith of auditing firm RHR Smith & Company reported an unmodified (clean) audit opinion and noted the city’s unassigned general-fund balance rose to about $1.2 million at June 30, 2024, roughly 30 days of operating expenditures by his calculation. “You received our highest opinion,” Smith told the council.

The council also voted to include a bond question on the ballot seeking authorization to issue up to $2,200,000 to buy a new aerial ladder fire truck. Fire Chief Libby said the current apparatus will be more than 30 years old by the time a replacement could be received; manufacturers’ lead times for custom aerial apparatus are currently two to three years. “We’re putting money into it to make it past certification,” Libby said, adding that a new apparatus is needed for access and safety at taller or setback buildings.

Public testimony at the hearing included a range of views. Resident Peter Kellman urged the council to let voters decide on a local-option tax, saying, “I think that the city council should vote tonight to put a 1% local option tax on the town meeting ballot.” Several business representatives and Montpelier Live’s executive director, Katie Trautz, asked the council to avoid placing the full cost of Montpelier Live’s municipal allocation on downtown commercial property owners; the council’s amendment to the sales-tax question was introduced in part to address that concern.

Council procedure and next steps: the council approved a final warning (ballot language) reflecting the changes, renumbered ballot articles accordingly, and voted to appoint the city manager (or the manager’s designee) as the city’s ethics-liaison staff contact. The town-meeting and ballot schedule remain as previously posted; the council directed staff to publish clear voter-facing materials explaining individual ballot items, the estimated household tax impact tools, and the timeline for when a voter-approved local-option tax would begin to be collected and distributed.

The council emphasized that revenue from the state‑administered local-option mechanism is collected by the Vermont Department of Taxes and returned to municipalities; staff noted that, if approved by voters, the state’s processing timeline could delay full-year receipts in FY26 and that the council intended the FY26 earmarks to apply only to the receipts the city actually receives in that fiscal year.

The council’s actions leave the ballot with a municipal budget that, as presented to voters, funds police, fire and public works at current levels while trimming a number of community programs and administrative positions to hold down the tax change. The council and staff said they will continue public outreach and provide a web-based tax-impact calculator so residents can estimate the effect of the budget and individual ballot items on their tax bills.