Late TCRS rate hike turns Hendersonville FY2027 operating surplus into shortfall, staff says

At the March 24 Public Works Committee meeting, the presenter reviewed the draft FY2027 operating budget and warned a late change to pension contribution rates will materially affect the proposal.

The presenter said the draft operating budget—recurring costs only—projected operating revenues of about $66 million and was balanced with a modest $24,000 surplus prior to receiving a notice from Tennessee Consolidated Retirement System (TCRS). The presenter said TCRS notified the city the employer contribution rate would increase from approximately 14.64% to above 17%, which the presenter estimated would add roughly $800,000 in annual employer costs and convert the $24,000 surplus into approximately a $750,000 deficit.

Committee members asked how the budget was balanced (paving and police vehicles were moved out of the operating budget into the PIP fund) and whether staff would revisit revenue projections. The presenter said the administration will re-run revenue estimates with additional months of receipts and consider further cuts; if revenues do not rise, staff will have to reduce expenditures to present a balanced budget without increasing property tax. The presenter also noted a 2.8% cost-of-living adjustment and merit/step raises are included in the draft.

Members discussed options and urged follow-up: re-evaluate assumed revenues, identify potential operating cuts, and prioritize statutory or restricted funds separately. The presenter said the finance director was reviewing the new pension rate and staff would update the Board of Mayor and Aldermen once numbers are finalized.