Lexington City Council Reviews Balanced Budget Focused on Long-Term Financial Health
Budget Debate Highlights Fiscal Stability, Taxpayer Concerns and School Funding Questions
LEXINGTON, N.C. — Lexington City Council members spent much of their recent budget discussion weighing the need for long-term financial stability against concerns about the impact of higher property taxes on residents following countywide property revaluation.
City staff presented a proposed Fiscal Year 2026-27 budget that represents a 9.68% increase and, according to officials, is the first budget since 2008 that does not rely on fund balance reserves to cover operating expenses.
City Manager Johnnie Taylor said the proposed budget reflects months of reductions and adjustments aimed at closing an initial budget gap of approximately $12 million. Staff identified more than $3 million in cuts through reductions in salaries and benefits, deferred purchases and the elimination of 184 general fund budget line items.
Taylor said continued reliance on fund balance to support day-to-day operations would be unsustainable and could eventually affect the city's financial position, bond ratings and ability to respond to emergencies.
Officials cited inflation, rising labor costs, aging infrastructure and increasing service demands as factors driving budget pressures.
City officials also noted that the proposed tax rate of 55 cents per $100 valuation represents a reduction from the current rate of 65 cents. However, because Davidson County recently completed a property revaluation, many property owners could still see higher overall tax bills despite the lower tax rate.
During the public hearing, local resident and business leader Burr Sullivan urged council members to adopt a revenue-neutral tax rate similar to the one approved by Davidson County commissioners. Sullivan argued that Lexington already has one of the highest combined property tax rates in North Carolina and warned that the proposed city tax rate of 55 cents per $100 valuation could significantly increase tax bills for some property owners due to revaluation.
Sullivan said some residents could see property tax increases approaching 48% and expressed concerns about affordability, rising rents and the city's ability to attract future economic development.
Council members acknowledged those concerns but generally supported the staff recommendation of a 55-cent city tax rate. Several members noted that the budget had already undergone substantial reductions and said additional cuts would likely affect services, staffing or infrastructure investments.
Council members pointed to ongoing needs including road maintenance, stormwater improvements, aging infrastructure, public safety operations and employee recruitment and retention.
Much of the discussion also focused on the Lexington City Schools supplemental tax rate. Council members debated whether to maintain the current 12-cent supplemental tax, reduce it proportionally with the city's tax rate or seek additional information from school leaders before making a recommendation.
Some council members emphasized the importance of supporting teacher recruitment and retention efforts, while others requested more detailed information about how any additional funding would be utilized by the school system.
No consensus emerged regarding the school supplement, leaving that discussion unresolved as budget deliberations continue.
Key issues that remain under consideration include the final city tax rate, the future of the Lexington City Schools supplemental tax and balancing taxpayer concerns with the city's long-term financial needs.
The proposed budget would establish a city tax rate of 55 cents per $100 valuation, down from the current 65-cent rate, while eliminating the use of fund balance for operating expenses for the first time in nearly two decades. City leaders are expected to continue discussions before adopting a final budget for the upcoming fiscal year.
