Lexington City Council is currently drafting its budget for fiscal year 2026 (FY26). According to the draft released on the city’s website, $43 million in expenditures is proposed, down from over $46 million in FY25.
The biggest change in the new budget is wages and benefits for city personnel. The proposal suggests an additional $955,000 to the current costs of nearly $16.5 million. A large amount of this money is for current employees to receive raises.
According to the budget overview, the general fund expenditures remain similar to FY25. The proposed general fund expenditures for FY26 are roughly $18 million. The general fund is used for administrative, operational, and debt service while it also sends money to other smaller funds.
The capital projects proposed in the budget include various initiatives, ranging from infrastructure improvements, such as new sidewalks and repaved roads, to improvements in Jordan’s Point and other local parks. The total proposed capital projects fund is $3.5 million.
City Council unanimously approved issuing $22 million of municipal bonds during their Feb. 20 meeting in order to fund several large projects.
According to the meeting minutes, estimates of the new social services building and renovations to the city hall take up $16.5 million out of the total $22 million in revenue brought in by the bonds. The remaining $5.5 million is for smaller projects such as utilities improvement.
The new Rockbridge Area Department of Social Services building will house offices and meeting spaces for clients and is scheduled to open in February 2026.
The meeting minutes state that interest rates for the bonds issued by Lexington will not exceed 5.5%, which is, in most cases, nontaxable.
State, county and city governments issue municipal bonds to use the revenue for everyday operating costs and to fund larger public works projects. Investors can buy these bonds and receive interest payments from the issuer, in this case the City of Lexington.
According to a budget overview released by City Manager Tom Carroll, property tax revenue increases are not on track to outpace inflation.
At the national level, a rise in inflation caused by President Donald Trump’s tariffs is estimated to be between 1.4% and 2.2%, according to a CNBC report on April 2, which could impact the city’s tax rates.
Other taxes, such as dining, sales and lodging taxes, are predicted to bring in $5.6 million according to Carroll’s budget overview, a nearly $37,000 decrease from FY25.
Lexington has roughly $2 billion worth of property within city limits, according to Carroll’s budget overview. However, because Washington and Lee University and Virginia Military Institute are tax-exempt and occupy around two-thirds of the total value, there is only $700 million worth of taxable property.
The FY26 budget estimates that Washington and Lee will contribute over $600,000 during FY26 through grants and direct payments.
The budget process is ongoing. According to a calendar under the finance section of the city’s website, approval of the budget will occur on May 1.
