A tax increase and more: What you need to know about Newport's FY 2023 proposed budget
NEWPORT — The proposed budget for the city of Newport’s upcoming fiscal cycle proposes a 3% tax rate increase to account for school building bond interest and COVID-19 pandemic revenue loss.
The city of Newport adopts a biennial budget every two years, outlining how the city plans to spend tax dollars for the various government services it provides. Fiscal 2023, which begins this July, is the second year of their budget process, however this year’s budget includes more detail than what is typical for the second year, as the biennial budget adopted in 2021 included a projection for 2023, rather than a proposed budget, due to the economic uncertainty associated with the COVID-19 pandemic. City Manager Joseph Nicholson explains this in his budget message at the beginning of the 2023 draft budget document.
The first public hearing on the budget passed with no members of the public coming forward to speak on May 11, and a second public hearing is scheduled for May 25, after which City Council will vote to adopt the budget.
Tax rate to increase by 3%
The proposed 2023 budget increases the tax rate by 3% for both residential and commercial, resulting in a $9.61 per thousand residential tax rate and $14.41 per thousand tax rate for commercial. In his budget message, Nicholson attributes this increase to an increase in the amount of money needed for the city’s General Fund, which is used to pay for the majority of government services as well as an increase in how much debt service owed by the city for its two school building projects.
Fire and Police budgets decrease as city proposes to pull from the OPEB Fund
Another change made to increase the city’s available revenue was the Finance Department’s decision to start pulling from the city’s Other Post-Employee Benefits Trust to pay for half of the city’s retired employee benefits. The city established its OPEB Trust in 2006 but decided to continue paying post-employee benefits through the General Fund until the trust had enough assets. According to Nicholson’s message, the OPEB Fund was about half funded (51.1%) as of June 30, 2021, with $70.6 million in assets, and pulling from the fund would reduce the city’s operating costs by $1.6 million for the General Fund and $1.4 million for the School Department.
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According to the city’s 2021 OPEB actuarial valuation report, 106 Fire Department retirees and 116 Police Department retirees meet the OPEB Plan’s minimum age and service requirements, making them eligible for benefit payments.
As a result of the proposed pull from the OPEB Trust to pay half of these benefits, the total amount of money allocated to the Police Department drops from $19.5 million to $18.8 million for 2023, and the Fire Department drops from $21 million to $20.8 million. Looking closer at the expense breakdown for both department shows decreases in allocation for health and dental insurance between 7% and 14% for personnel in both departments.
School budget to remain the same as debt service on schools increases
While the city plans to keep the school budget the same as it was last year at approximately $27.27 million, the debt service on the two bonds for the Pell Elementary School extension and new Rogers High School building increased by $3.9 million this year as a result of the interest on the bonds. As a result, the proposed budget allocates $8.4 million for debt service payment, which is an increase of 85.94% from the previous year and now accounts for 8% of the total General Fund budget.
This article originally appeared on Newport Daily News: Newport fiscal 2023 proposed budget raises tax rate, pulls from OPEB
