Lenoir City Manager presents 2026-27 budget proposal

City Manager Scott Hildebran’s Budget Message

May 19, 2026

Honorable Mayor Gibbons and Members of the City Council:

Pursuant to Section 159-11 of the North Carolina General Statutes (NCGS), Local Government Budget and Fiscal Control Act, I am pleased to submit the Recommended Fiscal Year (FY) 2026-2027 Budget for your review and consideration. This document provides a financial plan for the upcoming fiscal year and was developed in accordance with the City Council’s priorities established in both the February Strategic Planning Retreat and the March Budget Retreat as well as during Council and Departmental meetings held over the past year.

The recommended budget addresses Council’s 2026 Priorities including: offering competitive compensation and benefits for recruitment and retention, addressing major corridor appearance and empty commercial buildings through continued code enforcement and beautification of public properties, exploring ways to close sidewalk gaps along US 321/Blowing Rock Boulevard by working with North Carolina Department of Transportation (NCDOT) & the Greater Hickory Metropolitan Planning Organization (MPO), continuing to develop strategies to attract attainable and affordable housing by promoting the Caldwell County Housing Plan and Living Lenoir 2045 Comprehensive Plan, and continuing to inform the public about City programs, services, and events, and encourage participation in government.

The proposed budget considers our current economic challenges such as concerns about rising costs, increasing health and general liability insurance costs, international conflict, tariff-related uncertainty, pending property tax reform, workforce competition, and overall financial market volatility.

A work session to review the Recommended FY 2026-2027 Budget is scheduled to be held on Thursday, May 21, 2026, at 6:00 p.m. and a public hearing on the budget is scheduled on Tuesday, June 2, 2026, at 6:00 p.m.

General Fund

The proposed General Fund budget totals $27,104,230 and is balanced with the property tax rate of 46¢ per $100 of assessed property value, the same as last year, which was the lowest in 25 years.  The budget maintains the current Rescue Readiness Tax Rate of 0.85¢ per $100 of assessed property value for a total tax rate of 46.85¢ per $100.  All fees and charges remain unchanged.

Nearly 76% of the General Fund’s revenue comes from property tax (43%), sales tax (24%), and franchise tax (9%) revenue. The remainder comes from a combination of state-shared revenue, investment earnings, and sales and services. Staff is conservatively projecting revenues based on FY 2024-2025 actual collections for the coming year. The Recommended General Fund Budget includes borrowing for a new 107’ ladder quint fire truck utilizing the Rural Economic Development Loan and Grant (REDLG) program with a 7-year, 0% interest rate loan through Blue Ridge Energy.  The General Fund budget does not use any fund balance.

Downtown Municipal Service District

The proposed Downtown Municipal Service District budget totals $285,875 and is balanced with the current downtown tax rate of 18¢ per $100 of assessed district property value and with the use of general funds.

Water and Sewer Fund

The proposed Water and Sewer Fund budget totals $14,523,270 and includes a 3.75% increase in water and sewer rates which, for a customer with 5,000 gallons of usage per month would be $2.12 per month. The budget also includes a 5% increase in water and sewer bulk/resale rates. The City has traditionally used the annual Consumer Price Index (CPI) as a gauge and guide when considering increases in water and sewer rates.  This year the CPI – Water/Sewer and Trash Collection Services was 4.4% in February of 2026. The increase in water and sewer rates is necessary to maintain current operations, comply with regulations, make system improvements and to allow for increased efficiency and reliability.

As recommended in our Water and Sewer Capital Plan developed by McGill Associates, the Water and Sewer Fund budget utilizes a retained earnings appropriation of $1,600,000 for capital expenditures.

Multi-Year Capital Projects

Over the past few years, the City of Lenoir has received substantial funding for multi-year capital projects that take an extended period of time to complete. The funding has been received from a variety of sources – the American Rescue Plan, State-directed appropriations, Community Development Block Grant (CDBG), numerous other grants, and private donations.

These funds will be utilized to complete City Council prioritized capital projects.  Some of the projects include more greenway connections and expansions, Fire Department sink-hole repair, Finley Avenue Water Improvements, the Hospital Avenue Sidewalk project, cybersecurity infrastructure, The Campus at the Historic Lenoir High School improvements, Harper Avenue Streetscape Project, Gateway Signs, and the Lenoir-Valdese Water Interconnection. Staff continues to seek grant opportunities and utilize grant funding to accomplish our capital goals.

The proposed operating budget does not specifically allocate any of this funding. Staff will present budget amendments and/or capital project ordinances as funds are obligated for these capital projects. A comprehensive list of projects and funding sources is included in the proposed budget packet for information.

Budget Highlights

The key components of this budget are:

• Core services are continued with revenue projections estimated in a realistic, conservative manner. The projections include consideration for the continued uncertainties of the future economic environment.
• Employee Compensation: The City, like most employers, is experiencing workforce challenges in the recruitment and retention of employees. City Council and Management continue to recognize that our talented employees are vital to the delivery of quality municipal services and are our most important resource. As the top strategic priority, the budget includes a Cost of Living Adjustment (COLA) of 2.5% for all employees plus $2,000 added to base pay for all full-time employees and continues to fund the holiday longevity bonus program.  The budget funds the mandated increase in the NC Local Governmental Employees’ Retirement System (LGERS) employer contribution rate, effective July 1, 2026. The law enforcement rate will increase from 16.10% to 17.10%, while the non-law enforcement rate will rise from 14.35% to 15.22%. The City’s group health insurance premiums will increase by approximately 2%, while maintaining the current plan benefit levels.
• It is proposed to begin a NC 401K Plan contribution match of up to 1% beginning July of 2026 for non-LEO employees. All sworn law enforcement personnel received a state-mandated 5% NC 401K Plan contribution.
• The cost of the City’s property and liability insurance will increase by 8% while the workers’ compensation insurance will decrease by 6%.
• Overall, the total full-time employee count is reduced by two positions (275 to 273), with one school resource officer being eliminated due to county staffing the position and one full-time aquatics position being eliminated and replaced with additional part-time staff.
• Though the proposed budget fully funds the police telecommunications division, it is anticipated that some, if not all of this division, will be shifted to Caldwell County per our consolidation agreement within the fiscal year.
• The proposed budget includes a new Budget and Financial Analyst position to assist with supporting long-term financial planning, financial forecasting, trend analysis, reporting, analytical and capital project assistance, and procurement. This position would replace the Special Projects Director position due to a re-organization of that position’s duties.
• Further, the proposed budget includes a new Fire Fighter III pay grade to provide additional structure to the department’s employee development program.
• To assist with employee development, it is recommended increasing the tuition reimbursement program from $2,200 to $3,000 per year for course work beginning after July 1, 2026.
• Street Resurfacing: The budget allocates $430,000, to continue implementation of our Pavement Plan, a $10,000 increase.  The State Powell Bill funding is expected to remain stable in the coming year. In addition, the budget includes $150,000 in funding for strategic paving for various Council priorities.
• Downtown: Funding is included to support our Downtown Master Plan, to expand downtown decorations, and to add planters.
• Code Enforcement: The budget includes $103,000 for building demolitions, foreclosures and nuisance and $34,000 in funding for contracted Western Piedmont Council of Governments (WPCOG) Code Enforcement Services (two days per week/four hours per day) to assist with nuisance and code enforcement for commercial and residential properties in response to the City Council’s priorities.  There is also $10,000 in operating funding allocated for additional help with  commercial enforcement as well as code revisions and modernization.
• Technology: There is funding for computer and information technology upgrades throughout the organization to enhance and improve operations and security.
• Environmental: The budget continues to fund the outsourcing of management and oversight of our Federal Phase II Stormwater Program to the Western Piedmont Stormwater Partnership.
• The budget funds all debt obligations.

Recommended General Fund capital investments total $1,649,400, an increase of $88,675 from

FY 2025-2026. Staff will use capital funding for various projects and purchases including:

• Vehicles for various departments
• Equipment upgrades for the Police and Fire Departments
• Sweeper Truck
• Playground Equipment at the Rotary Soccer Complex and Mulberry Recreation Center
• Lenoir Aquatic and Fitness Center improvements

A complete list of General Fund capital items is included in the budget packet.

Recommended Water and Sewer Fund capital investments total $3,767,500.00 an increase of $743,500 from the previous year which is primarily due to the purchase of a Vacuum Truck replacement.  Water and Sewer Fund capital items include:

• Repairs and renovations at the Water Treatment Plant
• Repairs and improvements for distribution and collections systems
• Replacement pick-up trucks
• Updates and maintenance to the Wastewater Treatment Plants

A complete list of Water and Sewer Fund capital items is included in the budget packet.

Downtown Municipal Service District capital funding totals $35,000 for additional holiday decorations.

Summary

The Recommended FY 2026-2027 Budget is balanced in accordance with State Statutes and attempts to address City Council’s goals and priorities for the coming fiscal year. As outlined in the highlights, the proposed budget increases employee compensation and continues to prioritize code enforcement. Staff is currently working to complete the new Living Lenoir 2045 Comprehensive Plan, and the budget allocates more than $3.7 million for water and sewer capital improvements to maintain the integrity of the system.

The Recommended FY 2026-2027 Budget will allow the City to maintain and enhance current service levels. I want to thank our staff for continuing to find cost savings and maximize resources to accomplish budget initiatives.

I would like to recognize and commend the efforts of Finance Director Donna Bean for her hard work and dedication in the preparation of this budget. Her thoroughness and guidance in the management of our financial operations is greatly appreciated.

Finally, I would also like to express my gratitude to the Department Directors, Team Lenoir, and City Council for your engagement, collaboration, and contributions on this important policy document. Our primary goal, each and every day, via our employee-led customer service initiative, remains to provide “Service Beyond Measure.”

Come “Create With Us” in Lenoir!

Respectfully submitted,

Scott E. Hildebran
City Manager