Suffolk manager proposes $954 million FY2026-27 budget with 1-cent real-estate tax cut and $5M school increase

City Manager Mr. Hughes and Finance Director Stephanie Wells presented the Suffolk City Council with a proposed FY2026-27 operating and capital budget totaling $954 million and outlined steps intended to preserve services while reducing the real-estate tax rate by one cent.

At a work session on April 1, Mr. Hughes said staff framed the budget around four themes identified during a council retreat: representing constituents, addressing affordability, investing in infrastructure and sustaining public safety. "We are looking at forward, some of the challenges, the things we really want to stress and emphasize in this proposed budget," he said as he introduced the plan.

Wells put numbers to the proposal: "The total proposed budget is $954 million across all of our funds," and the general fund is projected to increase 5 percent year over year. The plan includes a tax-rate reduction from $1.07 to $1.06 per $100 of assessed value and a hotel-room tax increase from $1 to $2 per night. Stormwater and refuse fees are being held flat for FY27, while public utility rates will continue annual adjustments.

Why it matters: City officials said the tax cut is enabled by a mix of expenditure reductions and use of reserves, but staff warned that some revenue sources are weakening. Wells showed reassessment-driven revenue gains have leveled off, which will reduce surpluses in coming years and constrain future tax-cut capacity.

Key allocations and policy choices: The budget proposes a $5 million local increase to schools funding for FY27; council and staff noted that the school board's adopted budget included an additional $7 million for maintenance projects. The proposal also includes a 3 percent cost-of-living adjustment for employees and a 1 percent regional compensation pressure adjustment tied to a pending salary study.

Staffing and operations: Officials cut capital outlay and trimmed travel and training to accommodate personnel investments. The manager said the FY27 request was reduced to 24 new positions (including hires across police, fire, court system and fleet), down from previous years' totals. The refuse fund transition to SPSA's sort program is budgeted without a rate increase but requires two additional refuse positions and $2 million for truck replacement.

Infrastructure and capital: The capital program outlined an $87 million capital improvements plan for FY27 across funds, but Wells said federal transportation grant declines contribute to a 27 percent year-over-year decrease in governmental capital project expenditures. The city plans to use $5 million of capital reserves in FY27 and maintain a $35 million annual general-obligation bond issuance program.

Budget risks and contingencies: Staff called attention to the growing impact of Virginia's disabled-veteran property tax exemption, estimating roughly $18 million in exemptions for FY27 (about 10 cents on the real-estate tax rate). The presentation also referenced state and federal uncertainty, IT maintenance backlog, and an economy that may be slowing.

Public participation and next steps: The budget documents and presentation will be available at suffolkva.us/budget and at municipal locations. Staff scheduled a public information meeting for April 7 at North Suffolk Public Library (4'7 p.m.), a proposed public hearing on April 15 (pending council vote), and budget adoption with a public hearing on May 6.

The council did not take a vote at the work session; members praised staff for the proposed plan and raised follow-up questions about risk-management costs, IT spending and claim-mitigation strategies. The item concluded with staff preparing for the public engagements outlined on the calendar.