Newark manager previews FY2026 budget with $20 million general-fund gap; warns of PFAS, substation costs and possible rate hikes

City Manager Tom Coleman on Aug. 18 presented a high-level preview of the proposed fiscal 2026 operating and capital budget to the City of Newark Council, saying the city faces an approximate $20 million shortfall in the general fund and will likely need new revenue or spending reductions to maintain current service levels.

Coleman said the city is "projecting revenues of approximately a $128,000,000," while department director figures show operating expenses of about $127,600,000, leaving a structural gap that planners expect to fill with a mix of transfers, borrowing and potential rate or tax increases.

The nut graf: Coleman and budget staff told council that the shortfall stems from rising personnel and utility purchase costs, inflation on materials, the end of federal grant programs such as ARPA, weaker permit revenues tied to slower construction activity, and continuing capital needs including a planned electric substation and federally required PFAS treatment at the Curtis Water Treatment Plant.

More detail: Director Jill Hollander summarized operating costs and drivers, saying personnel and utility purchases account for roughly 79% of operating expenses and noting a projected 7% increase in health insurance and 3–5% range for cost-of-living increases set by union agreements. Hollander said operating expenses are up about 5% from 2025 and that the general fund shortfall must be addressed by policy decisions. "This shortfall can be thought of as a gap between operational needs and available resources," she said.

Coleman and staff identified several specific pressures and choices for council consideration: whether to raise utility rates (the administration estimated the water fund may need an increase "by probably 25% or more" to cover debt service and operating costs for the required PFAS treatment project at Curtis); creation of a rate stabilization adjustment (RSA) for water and sewer funds similar to the existing electric RSA; phased rate increases to avoid a single-year rate shock; a hiring freeze or targeted vacancies to reduce costs during the budget process; and new fees such as charging for mailed utility bills (staff noted about $135,000 per year in postage). Coleman said, "we're going to have to start paying for capital ourselves again," citing the end of large federal grants.

Capital highlights and timing: staff displayed a proposed capital program that includes a new electric substation (to be financed in part through a DMACC-bundled borrowing) and a $27.06 million planned borrowing for PFAS treatment at Curtis Water Treatment Plant to meet regulatory requirements. Coleman told council the net cash need from current resources for 2026 capital is roughly $7 million. For water PFAS treatment, staff estimated about $1.5 million per year in debt service and roughly $1 million per year for filter rebedding as operating costs once treatment is online, leading to the roughly 25% water-rate estimate. The city expects to be about two to three years away from debt-service payments on that project.

Revenue changes called out by staff included a projected decline in building permit revenue from about $1.6 million to roughly $1.0 million (a $600,000 reduction) and a drop in parking and related revenue tied to lower downtown demand and the end of a temporary lease for a surface lot.

Council response and next steps: council members pressed for additional detail during upcoming departmental hearings and asked staff to return with more analysis on options such as staged rate increases, mininum retained capital in funds, and targeted vacancy holds. Several council members supported establishing an RSA for water and sewer and phasing in PFAS-related increases over multiple years. Staff laid out a schedule of departmental presentations leading to a final budget workshop on Nov. 3.

Ending: Coleman and staff did not request votes on fiscal policy at the Aug. 18 meeting; instead they asked for council guidance as department-level hearings proceed and for direction on whether to hold noncritical vacant positions pending the budget outcome.