Home News and Features A Message from City Hall: FY25 City Budget Proposal

A Message from City Hall: FY25 City Budget Proposal

I presented the City Manager’s recommended budget to the City Council last week. The Council will review this proposal on Dec. 20, Jan. 3, Jan. 10 (possible public hearing), Jan. 17 (if needed), and Jan. 24 (final public hearing). The Council will make changes as they see fit. The Council’s budget will be on the March 5 Town Meeting Day ballot for voters to consider.

How Do We Develop the Budget?

Our leadership team holds what we call “Budget Congress.” During Budget Congress, we meet together to outline an overall city budget that we will then recommend to the City Council. 

We had a monumental challenge this year — by far the biggest budget gap during my tenure. To close that gap, our leadership had to make many difficult decisions that ultimately will affect the level of service we’re able to provide. Please read on to see where we made cost savings and what to expect in the next fiscal year.

 We build the budget by first calculating our expected revenues from non-tax sources. We work hard to make sure these numbers are realistic but not overly optimistic.

We then calculate “what we do now” in next year’s costs. This includes updating salaries, wages, and benefits, known operations costs (gas, oil, salt, sand, leases, electricity, insurance, specific departmental supplies), and any known fixed costs such as debt, organization dues, and the like.  

We then add policy choices — for instance funding the capital and equipment plan at the full $2.4 million versus $2.153 million in the current budget. We needed to cut $3 million in capital projects and equipment to get to $2.4 million.

We then add departmental, committee, policy, and other requests that go beyond the current base expenditures.  

All of this creates the starting point for the budget. The net of the fully funded budget minus the estimated revenue we will bring in sets the amount of money to be raised by property taxes. We do a similar process with water, sewer, and other non-tax-funded operations. 

Why is This Year so Challenging?  

There are a combination of factors why this year was so tough. The pandemic, projects, equipment shortages, and other delays created a backlog in previous budgets. Some of that was allayed through ARPA funding, but not all of it. 

Inflation coming out of the pandemic put stress on general operating costs and, of course, created big project costs. Even if funding had been allocated, our dollar bought less. 

Most importantly, inflation created a fluid job market where people could find work for higher pay elsewhere. We found ourselves (as did many other employers) with severe worker shortages to the point where we could not effectively deliver our base level of services. We adjusted pay levels and were able to fill most positions, although we are still missing an engineer which we desperately need. 

All of this came to roost in FY23 when costs for our fundamental services exceeded our budget because we have been holding the line so tightly on budgeted operating costs. This summer’s flood added to the financial stress. We adopted a $1.5 million budget reduction in this current year to offset flood-related losses. This further delayed some projects and purchases and held jobs open after we’d almost reached full staffing.

To correct for these factors, we rebuilt the base budget with updated funding to reflect current costs and trends. This meant increases in things like legal, salt/sand, overtime, supplies, fuel, insurance, and such. We stayed committed to meeting the full $2.4 million capital plan target. 

All of this led to a much larger than usual initial budget. To stay within the 3.2% inflation rate (as of October), the budget required a reduction of $1.259 million. A reduction to 0% tax change would require an additional $367,870. 

 Hard Choices and Spending Cuts

  • Property Tax Rate at 3.2% increase.
  • Grand List projected at no increase from FY24. Does not include a potential reduction in Grand List from the appeal process nor any potential additions from new value.
  • Revenues reviewed carefully and estimated conservatively. Local Options Rooms, Meals, and Alcohol tax estimated low due to businesses being closed. This could change by July 1 but we don’t know that now.
  • Capital Plan is funded at $2.4 million, which is the established target and up $246,500 from FY24 (pre-flood related cuts). Of that, $658,000 is for paving, which exceeds pre-pandemic funding level.
  • Economic Development cut from $100,000 to $0.
  • Housing Trust Fund request for $250,000 cut to $50,000.
  • Montpelier Energy Advisory Committee request for $12,000 cut to $2,000.
  • GMT My Ride cut from $40,000 to $0.
  • Community fund request of $166,475 cut to FY24  level of $134,159.
  • National Citizen Survey cut from $25,000 to $0.
  • Public Arts cut from $10,000 to $0.
  • Social Equity and Justice cut from $10,000 to $0.
  • Country Club Road direct appropriation cut from $40,000 to $0.
  • Committee Stipends cut from $20,000 to $0.
  • Outside lobbying cut from $15,000 to $0.
  • Tree Board cut from $4,000 to $0.
  • Conservation Commission Cut from $3,500 to $0.
  • Page in Montpelier Bridge cut from $14,000 to $0.
  • Homelessness task force cut from $47,000 request to $19,500.
  • Social Worker position ($27,500) remains in budget.
  • Envisio Strategic Planning software eliminated $15,000 to $0.
In addition to the above line items, the following reductions were made in departmental budgets:

  • The leadership team will forego the budgeted 3% cost-of-living pay adjustments saving $54,550.  Other staff wages were budgeted either as determined by the union contract or at a 3% adjustment. An additional $65,000 will be reduced before July 1 by an internal assessment.
  • Eliminate the police canine position, which saves overtime for training, grooming, and vet for $20,000. Some full-time police costs will be shifted to the parking fund, saving $55,000.
  • Eliminate one Police Officer position (17th) currently vacant, saving $100,000. 
  • Eliminate one Firefighter position and reduce Fire Department Overtime, saving $170,000.
  • Eliminate one DPW position currently vacant, saving $87,858.
  • Eliminate the AmeriCorps and Montpelier Youth Conservation Corps program in Parks, saving $65,538, and require an additional Parks reduction of $15,000. 
  • Recreation would continue to leave one position vacant, reduce overtime, and eliminate the after-school childcare program, saving $64,000, and an additional Community Services tax appropriation reduction of $35,000.
  • The requested Cemetery funding would be reduced by $41,161 to match FY24 level of $103,464. 
We welcome any feedback or suggestions about this proposal. We will provide updates as the Council makes decisions throughout the process.

Thank you for reading this article and for your interest in Montpelier city government. Please feel free to contact me with questions, comments, or concerns at wfraser@montpelier-vt.org or 802-223-9502.