Fairfax City manager proposes FY2026 budget with tax and fee increases to fund schools, staff pay

City Manager Brian Foster presented the City of Fairfax's recommended budget for fiscal year 2026 on Feb. 25, telling the City Council the proposal is a "plan of action" that reflects the community's priorities and the council's strategic plan.

Foster said the budget responds to a sharp increase in the city's school tuition contract and includes measures to maintain service levels while preserving the city's AAA credit rating. "The primary driver is the school's tuition contract increase of $12,600,000," he said during the presentation.

Why it matters: The tuition contract increase forces trade-offs across other priorities. Foster said the recommended budget does not use unassigned fund balance to balance FY2026 and preserves current service levels while funding staff compensation adjustments. Key items in the proposal include a recommended 3.5% merit increase for general employees, step increases for public safety personnel and implementation of remaining pay-study market adjustments.

Major revenue and rate changes: Foster described a set of revenue actions to balance the budget without tapping unassigned reserves, including "a 9 and a half cent increase to the real estate tax rate, which will take us from $1.03 to $1.12 and a half cents," an increase in the meals tax from 4% to 6%, a 6% wastewater rate increase (an average annual bill increase of about $42), and a 6% stormwater utility increase (about $10 annually for the average account). He noted "for a person purchasing a $50 meal, this would be an additional $1 in expense."

Spending priorities and school capital: Foster said the proposal fully funds the school board's tuition request and allocates $3,000,000 to initiate the approved $220,000,000 school capital program; he also flagged a one-time $6,800,000 debt service payment that reflects an early COVID-era short-term loan coming due. He emphasized the city's AAA ratings from S&P and Moody's and said that strong ratings should save the city an estimated $8 million to $11 million in interest costs over the life of planned school bonds.

Constraints and next steps: Foster noted legal and structural constraints on revenue authority in Virginia (Dillon Rule) and described the budget timeline: staff and council will hold multiple work sessions beginning March 4 and must set the maximum advertised tax rate by March 11. "This is my recommended city manager's budget for fiscal year 2026," Foster concluded; council members will have further opportunities to ask questions and propose changes at the scheduled work sessions.

What happens next: Council will begin budget work sessions March 4; staff will provide the budget book and related materials and the council will consider adjustments, public comment, and the advertised tax rate in the coming weeks.