Montpelier council targets job cuts to avoid 24% tax increase in FY26

This story by Carla Occaso first published On the Bridge on November 20

Montpelier City Council is preparing for budget cuts when the first draft budget is due Dec. 11. Initial figures to run the city in fiscal year 2026 without cuts to current spending would result in taxes rising above 24%. Montpelier Chief Financial Officer Sarah LaCroix.

LaCroix emphasized that the “budget discussion” report at the Nov. 13 city council meeting was not a proposed budget, but rather a compilation of costs at current service levels.

“I expect the FY26 budget process to be the most difficult in recent history,” LaCroix wrote in his report. In the preliminary budget you see attached, a 24.1% tax revenue increase is envisaged. This percentage increase equals $2,858,674 or 21.77 cents over the tax rate; “This demonstrates the challenge ahead of both Council and City Leadership.” He blamed the increases on inflation, personnel costs, repairing items cut last year and increasing the capital improvement plan.

All collective bargaining agreements expire June 30, adding to an unknown expense package, LaCroix said. Additionally, Blue Cross Blue Shield reported that health insurance premium renewals increased by 22.2% in the first six months of the year. Also coming is a bond vote seeking funding for a tower truck for the fire department, costing between $1.9 million and $2.6 million. He said he added back the $900,000 that was cut from last year’s budget, including some positions in parks, recreation and other items. That’s why his office is seeking guidance on the cost targets or objectives on which to base the initial budget proposal, the report says.

City Manager Bill Fraser said asking councilors to consider the budget before seeing the first draft was a different process than in previous years, but he and LaCroix wanted “all of you and the public to know how daunting the choices are.”

Council member Lauren Hierl asked if there were other ways to raise money, such as a local option tax. Council member Pelin Kohn requested a list of personnel needed to provide basic services such as police, fire department and public works. Council member Tim Heney noted that 75% of the budget consists of labor and related costs. “I don’t think we can really go into this process saying we can protect our entire workforce,” Heney said.

Council member Cary Brown said he agrees the 24% tax increase “isn’t something we can do” and talked about really prioritizing needed services like emergency, fire and police, as well as trying to maintain funding for the capital plan and paving plan.

“It was pretty dark for me when I was reading this,” Council member Sal Alfano said. “We need to look at personnel. It’s a very difficult thing to do, but we need to see what the options are.”
Heney suggested looking at a 3.5 percent consumer price index increase as a target. He asked LaCroix how much money would be needed to achieve this goal, and LaCroix said it would be about $2.5 million. Heney also suggested considering the senior activity center, justice center, recreation department and administrative staff as areas that need to be cut. LaCroix said the Community Justice Center is 100% grant-funded.

Council member Adrienne Gil said she read other cities’ budgets and noticed that 30 percent went to public works; 30% to police, fire and emergency services; 10% to head office staff; 10% to parks; 10% towards rec; and 10% is devoted to economic planning and development. Fraser said more detailed information will be provided in the first budget presentation.