Portsmouth City Council Work Session on FY2026 Budget and Tax Rate – May 12, 2025

The Portsmouth City Council held a work session on May 12, 2025, starting at 10:15 AM, to discuss the proposed FY2026 budget reconciliation, school funding gaps, a potential revenue sharing formula with Portsmouth Public Schools, and a permanent reduction to the real estate tax rate. The meeting included presentations from City Manager Stephen Carter and Budget Director Trey Burke, followed by extensive deliberation among council members. No public comments were heard.

Discussion Items

• FY2026 Budget Reconciliation Presentation: Mr. Burke presented key changes from the originally proposed budget to the one recommended for adoption. Additions included $1.5 million in additional funding for Portsmouth Public Schools (bringing the total increase to 10% over the prior year and raising the city's contribution to $82.8 million), and new funding for community organizations. These were offset by a $700,000 reduction in the citywide paving allocation, elimination of a pay initiative in properties management, and a meter replacement program in public utilities. The budget increased by 4.4% ($1.2 million) over the original proposal. Speed camera fines were projected at $311,749 based on actual receipts. Council members questioned the paving cut details and the source of speed camera revenue.

• School Funding Gap and Solutions: The school board requested an additional $1.9 million beyond the $1.5 million added. Councilman Hugo presented two potential solutions: (1) that the school board acknowledge $1.9 million in salary and benefits from unfilled positions (vacancies) in their budget, a practice the city uses; (2) that the city provide a one-time $1.9 million loan from the general fund balance, with the condition that the school board repay it from their end-of-year surplus. He supported these as ways to avoid program cuts. Councilwoman Thomas questioned whether these options had been discussed with the school board during prior liaison meetings. City Manager Carter confirmed they had been suggested during negotiations but not presented formally. Councilman Dotson criticized the school board's fiscal management, noting consistent large surpluses and surprise projects. Councilwoman Bryant emphasized the need for a better partnership and cautioned against attacking the school board. Councilman Tillett expressed concern over federal funding cuts and urged full funding for the schools. Vice Mayor Moody supported the second option (loan from fund balance) but opposed cutting paving or delaying city employee raises. Mayor Glover stressed the council's commitment to education and urged collaborative solutions.

• Revenue Sharing Formula Proposal: City Manager Carter introduced a framework for a multi-year revenue sharing agreement with the school system, aiming to provide predictable funding and reduce annual budget disputes. Key components include: negotiating a base funding percentage tied to certain city revenues, a mechanism for one-time extraordinary requests, reconciliation for revenue projections, and a defined process for handling the school system's unused funds at year-end. He noted that Norfolk, Virginia Beach, and Hampton have similar plans. Council members discussed the importance of a baseline, the need for performance metrics, and the role of accountability. Councilman Hugo proposed that an unfunded priority list be built into the process to guide end-of-year surplus allocations. Councilman Tillett cautioned against repeating the failed 2017-2018 formula that resulted in a funding cut. Council members generally supported moving forward with development of the formula.

• Real Estate Tax Rate Reduction: Vice Mayor Moody proposed permanently lowering the advertised tax rate from $1.30 per $100 assessed value to $1.24, reflecting the six-cent credit that had been applied in recent years. He argued this would provide clarity to citizens and demonstrate confidence in the city's direction. Councilman Hugo raised the issue of political courage to later raise the rate if needed. Councilwoman Thomas noted the perception issue of having the highest published rate in the region. Councilman Dotson suggested a compromise of a three-cent reduction. After debate, Vice Mayor Moody called for consensus on a one-year reduction to $1.24 for the upcoming fiscal year. The council agreed via a show of hands.

Key Outcomes

• Consensus to Authorize City Manager to Pursue Two Options for the $1.9 Million School Gap: The city manager was given authority to negotiate with the school board either (1) acknowledging $1.9 million in vacancy-related salary/benefit savings in the school budget, or (2) providing a one-time $1.9 million loan from the general fund balance, to be repaid from the school's projected end-of-year surplus. The manager was to communicate the outcome to council by 2:00 PM the next day (May 13) via phone or email, so the adopted budget could be amended if necessary.
• Consensus to Lower Real Estate Tax Rate to $1.24 for FY2026: The council agreed to set the tax rate at $1.24 per $100 assessed value, eliminating the six-cent credit and making the rate permanent for the upcoming fiscal year. This decision was made by a show of hands, with the understanding that the budget would reflect this rate at adoption.
• Closed Session Motion: The council voted unanimously to enter a closed session under Virginia Code § 2.2-3711(A) to consult with legal counsel regarding specific legal matters related to shootings in the city. A five-minute break was taken before the closed session.

Note: The meeting transcript references the city as "Woodsmouth" in the opening greeting, but all subsequent context confirms it is Portsmouth. The agenda and minutes were not available for this summary.