Council approves FY2027 budget (minus appropriations) and adopts water and sewer budgets; tax increase driven by debt and corrected accounting

Newport City — The City Council on Monday approved a proposed FY2027 budget for voter warning (excluding separately warned appropriations) and, while convened as water and sewer commissioners, separately approved the water and sewer budgets.

The council voted to forward the city’s general fund expenditure budget for voter consideration with a motion approving $9,341,645.09 in expenditures (the approved figure removes the appropriations lines to be warned separately). That total included $3,184,208.45 in non-tax revenue, leaving $6,157,436.64 to be raised by property taxes as presented in the warning language the council will finalize on Wednesday.

Why it matters: The proposed levy increase — roughly an 11% increase cited in council discussion — is driven largely by debt service and corrections to past under-budgeted obligations. Councilors and staff told residents the rise reflects previously uncounted debt-service payments, accurate accounting of expenditures that were historically off the books, and routine personnel cost increases.

Key financial details: Finance staff Chip presented the interfund balance and balance sheet. Highlights included a general fund cash balance (~$2.86 million), a $500,000 outstanding draw on a $2.8 million tax anticipation line of credit, and a $2.213 million bond-anticipation note related to the East Side Water Tower project. Chip reported that the sewer fund still owes roughly $162,000 to the general fund and that sewer uncollected receivables are near $189,000.

Drivers of the tax increase: Council estimated the tax increase reflects approximately $635,000 more to be raised than the prior year’s approved figure. Roughly two-thirds of that amount reflects debt service and previously under-budgeted liabilities; the remainder includes a 3% across-the-board wage increase and additional budgeting for a full year of a city manager salary (budgeted increase from $95,000 to $125,000).

Water and sewer specifics: Acting as water and sewer commissioners, the council approved a water fund expenditure budget of $1,227,301.10 and a sewer fund budget of $2,621,787. Chip described steps to recover enterprise deficits through phased rate changes and capital planning. The council discussed and budgeted a $20,000 capital planning item for leak-detection equipment (offset by reducing the water meter line from $25,000 to $5,000) and debated whether to include budgeted depreciation; for water the FY27 budget includes a modest depreciation line ($27,000) to reconcile accrual accounting with planned principal payments associated with a recently completed water tower.

Process and next steps: The council approved the general-fund budget (minus appropriations) by motion and will finalize and warn the ballot language at a working meeting Wednesday. Appropriations (town/voter-approved items) will be warned and voted separately. Council members emphasized they will continue regular financial reviews with Chip and staff and that the finance task force will continue deeper budget-to-actual analysis in the coming weeks.

Votes and formal actions: Motions to adopt the general budget for warning, and to adopt the water and sewer budgets as commissioners, were passed by voice votes. The council adopted the consent agenda earlier in the meeting and closed the charter public hearing without substantive action.

What to watch: The council will reconvene Wednesday to finalize warning language for the March 3 ballot and continue the planned two-day schedule for voter materials. Residents can review financial packets online as part of the warned meeting materials.