City staff warn tighter FY26 budget as revenues cool and state mandates grow

Deputy City Manager Brian De Profio opened the budget presentations by framing the fiscal choices ahead for FY26, saying the budget is “the most important policy document that council adopts each year” and that it primarily funds education, public safety and personnel costs.

“Education is the biggest thing that we spend money on,” De Profio said, adding that the city shares 61.83% of certain local tax revenue with schools. He told council that personnel now represents about 55% of the budget and that recent growth in public-safety and benefit costs has put pressure on operating flexibility.

De Profio and City Manager staff urged conservative budgeting to preserve structural balance and warned that state actions are transferring costs to localities. He highlighted two large state-driven items that will affect Hampton’s bottom line: the Disabled Veteran Tax Relief program and the Line of Duty benefits the state shifted to local governments.

The presentation and subsequent council discussion emphasized three near-term constraints: slower real-estate assessment growth than recent years, uncertainty in federal grant funding, and rising construction and equipment costs tied to inflation. The city manager summarized: staff will seek to balance meaningful compensation adjustments, targeted investments, and possible tax relief while preserving contingency and avoiding one‑time revenue for recurring expenses.

The council did not take any formal vote on policy during the session; members provided nonbinding polling guidance on compensation and a preliminary preference on an equalized tax-rate target, which the manager will use to shape the recommended budget.