Portsmouth City Manager presents FY2027 budget proposal of roughly $360 million with no tax increase; schools receive reduced allocation

City Manager Stephen Carter presented the Portsmouth City Council with the city’s proposed fiscal year 2027 general fund budget on the opening of a special meeting, saying it would be offered without an increase to the city’s real property tax rate.

"This year, our general fund budget is $360 million," City Manager Stephen Carter said, framing the document as a "plan for action" focused on core services, public safety, workforce investments and neighborhood revitalization.

The budget packet as described by the city manager and Budgeting Officer Trey Burke centers on three themes: maintaining core services, investing in employees and moving major capital projects forward. Mr. Carter listed key capital priorities the draft funds, including relocating City Hall, building a new K–8 school, a combined public safety facility, relocation of the Cradock fire station and completion of the PACE Center.

Budgeting Officer Trey Burke told council the total proposed general fund revenues are $360.7 million, a 6.3% headline increase over FY2026, but he urged members to focus on the underlying recurring growth of about 2.9% after excluding an atypical real-property valuation adjustment and a one-time fund-balance draw. "When you strip those two out, the underlying revenue growth is approximately 9 million dollars or roughly 2.9%," Burke said.

The draft holds the real property tax rate at $1.24 per $100 of assessed value, increases water and sewer rates by 5%, and sets stormwater fees at $0.75 per Equivalent Residential Unit. Personnel costs, including a 3% wage increase and grade-and-step adjustments, drive most of the year-over-year expenditure growth, Burke said.

The draft also allocates funds to retiree obligations and benefits. The FY2027 proposal lists $10.1 million for legacy pension obligations, $8 million for police retirement costs, $2.1 million for the supplemental retirement system and a council-directed $1,500-per-participant payment budgeted at $1.4 million. Combined retiree-related commitments total about $21.1 million for roughly 942 participants; as of June 30, 2025, the combined net pension liability was $63.8 million with a funded status of 75.4%.

On long-term liabilities, Burke said Portsmouth’s debt-to-assessed-value ratio is 3.8% (under the 4% policy limit) and the debt-service-to-revenue ratio is 8.23% (under the 10% policy limit). He presented a projected 10-year payout ratio of 73% and recommended formalizing OPEB funding after noting a $1.5 million contribution in the current proposal and $8.5 million contributed to the OPEB trust since 2018.

Mr. Carter also flagged the budget’s emphasis on execution and transparency, saying staff will launch a financial-transparency dashboard so residents can review how public funds are being used.

On school funding, Mr. Carter said the school division originally requested $14.3 million (reduced in discussions to $12.8 million), but the balanced budget draft before council allocates $7 million to the school system. "I talked to Dr. Bracey about this," Carter said, adding that city and school leaders will continue to seek a middle ground.

Public hearings on the budget will be held at regular council meetings on April 14 and April 28 and on May 12 at 7:00 p.m.; the May 12 hearing will focus only on rates and fees, and budget ordinances are scheduled for presentation on May 12. Councilmembers were asked to submit questions ahead of scheduled one-on-one meetings with staff to allow prepared responses.

Councilmember questions during the meeting focused on the sustainability of the headline revenue growth. Councilwoman Thomas pressed staff to clarify whether the 6.3% increase was recurring; Budgeting Officer Burke said most of that growth stemmed from a one-time real-property valuation adjustment and fund-balance draws, and that recurring revenue growth is closer to 2.9%.

The meeting concluded after questions and a reminder of a work session scheduled for the following day. No formal votes were recorded during the special presentation.

Next steps: staff will present budget ordinances on May 12 and hold the scheduled public hearings in April and May as outlined by staff; councilmembers will follow up in individual meetings with staff prior to final adoption.