Monroe staff presents FY 2025–26 general fund budget overview; revenue‑neutral rate, reserve and public‑safety funding debated

City finance staff on April 29 presented an overview of the proposed fiscal year 2025–26 general fund budget to Monroe City Council, explaining revenue drivers, the revenue‑neutral tax calculation, reserve balances and recommended fee and staffing changes. No final budget adoption occurred; staff will return for further discussion and enterprise fund review on May 13.

Finance Director Lisa Strickland led the presentation. She said the revenue‑neutral tax rate was calculated under state statute and reported on the record as 38.74 cents ($0.3874). Strickland described how that rate is a single, statutory calculation intended to yield the same revenue as the current year after revaluation and growth are applied. Staff showed scenarios for different homeowner value brackets to illustrate how revaluation changes taxable values and individual tax bills.

Strickland and other staff walked council through key figures used in the draft general fund discussion: the FY 2025 assessed value figure cited in the presentation, prior revaluation comparators and an FY 2026 valuation figure from Union County that staff used to calculate the revenue‑neutral rate. The presentation noted that 64.2% of Monroe homes fall in the “median” value bracket used in the examples and that 15.9% were shown in a lower bracket, together representing about 76.6% of the residential tax base under the current valuation.

Staff highlighted several revenue and cost dynamics shaping the draft budget. Vehicle property tax collections were projected to drop under the revenue‑neutral calculation, producing a loss in the order of several hundred thousand dollars (staff cited roughly $640,000). Sales tax distribution was explained as County‑pooled and allocated by each jurisdiction’s percentage of the prior year levy (a TR‑2 reporting process through the North Carolina Department of Revenue), meaning shifts in local levies across the county affect Monroe’s share.

Strickland presented fund‑balance figures: an April 30 unassigned fund balance of about $2.6 million and a projected year‑end unassigned balance of just over $9 million. Staff proposed using $4.5 million of that projected amount in FY 2026 (including economic development incentive grants), leaving approximately $4.5 million available for other one‑time needs. The council’s fund‑balance policy target was described as 25% of the adopted budget; staff said the 25% reserve is currently around $15.8 million and that this sits on top of the statutorily required reserve (discussed in the packet). Council members discussed whether a portion of those reserves or the projected $4.579 million one‑time balance could be redirected to support immediate priorities.

On expenditures and priorities, staff listed inflationary and contractual increases (health insurance, retirement, workers’ comp), debt service increases tied to recent capital projects (fire truck, refueling trucks, IT/office construction), and other operating needs. Several items were described as not included in the draft because of constrained revenue: improvements to a street paving program (remaining general fund need about $2.08 million), two additional police officers and six firefighters (combined roughly $878,000), and a 2% cost‑of‑living adjustment (COLA) for employees (estimated at just over $1 million). Staff said funding those public‑safety positions and a COLA would require a new revenue source (e.g., a property tax increase).

Council members and staff discussed options and tradeoffs. Staff provided the working rule of thumb cited in the presentation: each penny (0.01) on the tax rate generates about $800,000 for the city under current values. Council asked staff to return with modeled reserve‑reduction scenarios (for example, alternatives to the 25% reserve) and other ways to support public safety staffing if the council prefers not to increase taxes. The mayor and several council members emphasized public safety staffing as a priority and asked staff to outline options for funding those positions without a full tax increase, including one‑time versus recurring approaches.

Staff also reviewed proposed fee schedule changes across many departments that would take effect July 1 if adopted: increases in utility service deposits and same‑day connection fees; adjustments to building permit and inspection fees; higher temporary certificate of occupancy fees; airport facility and transient fees intended to encourage fuel purchases; modest increases to solid‑waste residential and small‑commercial fees to cover rising contract and landfill costs; and a recommended 5.5% water/sewer rate increase per the December rate study, with certain bulk and availability charges raised by 8% per the study. The parks/aquatics center would adjust membership categories and ages and proposed modest price changes tied to operations. Staff stressed many personnel requests had offsetting revenue (for example, golf simulator staffing funded by the venue’s operating revenue) while others would create recurring costs.

No budget ordinance was adopted at this meeting. Staff said they will bring enterprise fund budgets and the final fee schedule back on May 13, along with reserve‑policy scenarios and requested data on COLA/bonus alternatives for employees. Council asked staff to produce cost estimates and options for prioritizing public‑safety hires and to provide the financial impact of waiving or changing certain user fees for specific populations (for example, seniors age 80+ at the aquatics center).

The meeting record shows robust questioning across councilmembers and back‑and‑forth clarification from staff. Council did not vote on the budget at this meeting and left open multiple policy questions for the May 13 strategic work session.