Town Manager Tyler Paulson opened a special Town Council workshop on Oct. 23, 2025, saying the town faces a structural imbalance: recurring expenditures have been growing faster than recurring revenues and, if unchanged, the towns reserves would fall below the councils 25% target in the next two to four years.

The workshop laid out the root causes (personnel, capital and medical costs), quantified the gap using the towns FY26 baseline and presented a menu of revenue and expense tools the council could use. Staff asked for direction on how to engage the community; the council gave staff direction to carry out at minimum an expanded informational campaign and asked staff to return with a targeted public-consultation plan.

Why it matters: Paulson told the council that, on the towns baseline, FY26 general-fund revenue was roughly $36.3 million against expenditures of about $39 million, producing a structural shortfall the town must address to hold reserves at council policy levels. "We are headed kind of in that direction. We do need to address it," Paulson said during the presentation.

Revenue and growth drivers: Finance Director Kelly Thompson summarized revenue history and options. Sales tax is the dominant general-fund revenue source (roughly 75% of general-fund revenue). Staff estimated a municipal-wide penny of general sales tax would generate about $11.3 million in the first year and grow by roughly $560,000 annually; an additional property-tax levy up to commonly referenced local maxima (the presentation cited that the town currently levies 0.5 mills and up to 8 mills is typical in other communities) could raise roughly $6.4 million and grow about $600,000 a year. Thompson also presented lodging-tax increments (each additional penny produces smaller revenue than a general sales-tax penny because of statutory splits) and explained there are countywide and town-only sales-tax structures the town could pursue with partners or on its own.

Personnel and benefits: Staff identified personnel as the single largest recent contributor to expense growth. Town personnel costs are about $14 million and represent roughly 39–40% of the general fund. Paulson and Thompson showed that, after compensation increases in 2022–23, personnel-related costs are now increasing more quickly than recurring revenue (staff estimated recurring revenue growth near $1.5 million per year versus recent expense growth nearer $2.5 million per year). The town has added roughly two full-time equivalents per year on average; Paulson said a single new FTE typically adds between $150,000 and $175,000 in direct cost and that adding an FTE to payroll can produce roughly $250,000 in recurring budgetary impact when salary and benefits are included.

Medical claims and insurance risk: Thompson and Kelly (finance staff) told the council the town is self-insured and experienced a bad year for claims in FY25. Thompson said higher plan enrollment (many vacancies filled plus family members) and a cluster of high-cost claims pushed the towns medical fund down. Finance staff said the towns working goal for the medical fund is about $700,000 in reserve and that, as of October, the fund balance was roughly $1.3 million. Kelly summarized drivers: more employees on the plan, a dozen high-cost claims in one year and marketplace premium changes; she told the council that stop-loss protections limit but do not eliminate volatility.

Capital and transfers: Staff explained capital spending has spiked because of large projects (the recreation center and a maintenance/fleet facility) and because the council historically has directed transfers from sales-tax proceeds into capital. Paulson noted the councils long-standing policy to transfer half of one permanent fifth-cent of sales tax into the capital fund; staff estimated that pausing that transfer would free roughly $5.6 million into the general fund in the near term (with recurring growth of roughly $280,000). The presentation also described the towns affordable-housing transfers (about $1 million per year historically) and that prior councils had reserved sums — roughly $5 million was cited in the presentation as previously set aside for a project referred to as the Virginia.

Tools presented: Staff grouped options into revenue tools (additional general sales-tax pennies or fractions thereof, a town-only sales-tax penny, lodging tax increases, additional property-tax mills, SPET/specific-purpose excise tax ballots and asset sales) and expense options (pause or reduce capital transfers, reallocate lodging-tax allocations, freeze new FTE growth, adjust benefits, consider bonding/borrowing for capital, and targeted reductions in levels of service). Paulson emphasized combinations of tools could be packaged rather than a single solution.

Community engagement: Staff asked the council whether to: (A) consult early (ask public opinion before the council forms a recommended package), (B) craft a draft strategy and then consult on that draft, or (C) proceed with enhanced informing and brief consultative outreach later. After discussion the council directed staff to proceed with at minimum an enhanced informing program (expand regular outreach channels, targeted briefings and publish materials); the council also asked staff to return with a modest, targeted consultation plan (staff described that as "B minus" in the workshop) that would rely on surveys, targeted focus groups and meetings with existing community organizations and business groups. Council members emphasized any consultation should be authentic (staff will be explicit about what could change as a result of public input).

What the council decided (direction, not an ordinance): staff were asked to prepare and return with a community engagement plan that includes expanded informational work plus a targeted consult option for council review. Paulson said staff would update the slide deck with additional data points requested by council and circulate it.

Process and next steps: Council members asked staff to refine the numbers and to return with a clearer timeline for any ballot options (staff noted a November 2026 ballot timeline would impose fixed deadlines for placement of a tax question). Multiple council members said they preferred the council have a chance to vet options and internal analyses before broad public consultation; others argued public consultation would build trust and should happen earlier. Staff said they would return with a refined engagement plan and updated fiscal estimates, and the council scheduled follow-up budget workshops before final FY27 decisions.

Adjournment: The only formal motion recorded in the workshop minutes was to adjourn; Councilor Shuck moved to adjourn and Councilor Regan seconded. The meeting was adjourned by voice vote.