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City projects 5.9% revenue growth; staff and council debate holding 0–2 pennies for contingency or tax relief
Summary
City finance staff projected 5.9% general fund tax revenue growth for FY26 (about $5.9M), split 50/50 under the revenue‑share policy would yield ~$2.95M to schools; cost drivers raise a $2.94M need on the general government side and the combined picture creates an approximate $2.0M shortfall, prompting council debate over preserving 0–2 pennies of the tax rate for contingency or rate reduction.
Karen Bauer, the city’s director of finance, presented the city’s FY26 revenue forecast to the joint meeting, saying general fund tax revenues are projected to grow 5.9, which the staff estimates equals about $5.9 million in new revenue. Bauer proposed continuing the city’s long‑standing 50/50 split of new development revenue, which would allocate roughly $2.95 million to schools and $2.95 million to the general government.
Bauer listed key assumptions behind the forecast: assessed value growth (city assessed values projected up 7.8%), new construction of about $198 million in assessed value, and an expected 6.9% increase in real estate tax receipts. She also walked through cost drivers on the general government side, which staff estimated at about $2.94 million (compensation and benefits increases, health‑insurance premiums, interjurisdictional contracts and utilities).
Staff said that under current school and general government requests the combined gap versus forecasted revenues is about $2.0 million. Councilmembers and staff spent substantial time debating options for guidance: a number of members proposed holding 0–2 pennies of the tax rate as a contingency that could either be used for an eventual tax reduction if revenues materialize or used to cover unexpected costs; others stressed the need to fund school contractual obligations and caution against reductions that would cut services.
Council members asked for additional comparative data and lifecycle analysis of growth revenues and costs, and staff committed to updating forecasts as new development and WMATA (regional transit) funding details become available. The council will adopt formal budget guidance next Monday, with the manager’s and superintendent’s formal presentations slated for the coming months.
What happens next: updated revenue and cost data will be delivered through the budget calendar; Council will adopt formal guidance and staff will return with more granular comparisons and options for tax‑rate adjustments or contingency reserves.
