Portsmouth City Council Work Session – March 24, 2025

The Portsmouth City Council held a public work session on March 24, 2025, at 10:15 AM. Seven council members were present along with City Manager Stephen Carter and other staff. The session featured two main presentations: a property tax update by Commissioner of the Revenue Frankie Edmondson, and the introduction of the proposed FY2026 operating budget and capital improvement program by the city manager. No public comments were heard. The meeting concluded with a closed session to discuss recent shootings.

Discussion Items

Property Tax Update (Commissioner Frankie Edmondson)

• Commissioner Edmondson reviewed the history of the Personal Property Tax Relief Act (PPTRA), noting that Portsmouth receives $9.8 million annually from the state, unchanged since 2004. The city supplements this with about $3.5 million to provide a 50% relief rate on qualifying vehicles (the first $20,000 of value). The proposed rate for 2025 remains 50%.
• Portsmouth's personal property tax rate is $5 per $100 assessed value, which has not changed in 19 years. Commissioner Edmondson noted that the city has one of the highest rates in the region and that a regional rate comparison would be provided.
• The median vehicle value in Portsmouth is $24,003; the mean is $31,854. Vehicle assessments are based on the JD Powers (NADA) pricing guide, as required by state code.
• Commissioner Edmondson discussed the assessment methodology, appeals process (including a Saturday appeals day on May 17, 2025, from 9 AM to 1 PM at City Hall), and the increase in exemptions (e.g., for qualifying veterans and disabled individuals). He noted that exemptions are not reimbursed by the state, creating a burden on the city.
• He also addressed the “gig economy” and the need to update tax classifications for peer-to-peer rentals like Airbnb, Uber, and boat clubs (e.g., Freedom Boat Club). Currently, personal and commercial watercraft are taxed at the same rate ($5 per $100), and a separate classification may be needed.

Council Questions on Property Tax

• Councilman Hugel requested a regional comparison of personal property tax rates and asked how the 50% relief interacts with the $5 rate. It was clarified that relief applies only to the first $20,000 of vehicle value.
• Councilman Dodson asked for a review of all tax rates and a comparison of Portsmouth’s rates to other cities. He also inquired about enforcement of unregistered vehicles; Commissioner Edmondson explained the compliance division and back-billing process.
• Councilwoman Thomas asked about the burden of exemptions on the city and the difference between the 50% relief and the lower percentages offered by neighboring cities like Chesapeake. Commissioner Edmondson explained that Chesapeake has a different growth profile and tax base.
• Councilman Tillage requested information on what one cent of the personal property tax represents in revenue (similar to real estate tax, where one cent equals roughly $1 million).
• Councilwoman Bryant asked about the boat tax issue raised by Freedom Boat Club. Commissioner Edmondson recommended further work with the city manager and attorney to develop a policy for gig economy businesses.

FY2026 Budget Presentation (City Manager Stephen Carter)

• City Manager Carter presented a video outlining the proposed FY2026 budget. Key priorities: public safety, infrastructure, technology improvements, and process improvement.
• Public Safety: Funding for a new public safety facility (police and emergency services) to be completed by 2028, and enhanced recruitment and retention packages.
• Infrastructure: New city hall (completion by 2028), demolition of the current civic center in January 2026, critical sewer pump station upgrades, and expanded street paving program.
• Technology: New permitting system, one-account billing system, redesigned public website and intranet.
• Process Improvement: New pay and classification plan with a 5% increase for all employees, establishment of change teams for continuous improvement, and employee appreciation events.
• Education: An additional $6 million increase for Portsmouth Public Schools, bringing total school funding to $81 million (a 7.6% increase). Combined with last year’s $12 million increase, the total $18 million annual increase equals the anticipated casino revenue. Funding for a new K-8 school.
• Revenue Adjustments: Real property tax rate remains $1.30 per $100 but the discount changes from 7 cents to 6 cents, resulting in an effective rate of $1.24 (a 1-cent increase). Water and sewer rates increase 5%, stormwater fees increase $2 per ERU, EMS fees are adjusted, and summer program fees are reinstated (with scholarships available).
• Budget Totals: Proposed total revenues of $338 million (3.4% increase over last year’s adopted budget). Local revenues projected at $244 million (3.9% increase), with real property taxes at $136 million, personal property taxes at $38 million, other local taxes $46 million, utility taxes $13 million. Expenditures: personnel $121 million (1.5% increase), school funding $81 million, contractual services $30 million, internal services $22 million, other non-departmental $8 million (18.1% increase), debt service increasing 5%, transfers and contingencies reduced 13%.
• Public Hearings: April 8, 2025, at 7 PM and April 22, 2025, at 7 PM during regular council meetings. Budget adoption scheduled for May 13, 2025.

Key Outcomes

• No votes were taken on the property tax rate, relief percentage, or the proposed budget. The presentations were informational.
• Council directed the city manager and commissioner of the revenue to provide a regional tax rate comparison and the revenue impact of one cent on the personal property tax rate.
• The council voted unanimously to enter closed session (motion by Vice Mayor Moody, seconded) to receive legal advice regarding recent shootings in the city. The meeting then moved into closed session.