KINGSPORT— Kingsport’s Board of Mayor and Aldermen got its first look Monday at the city’s proposed fiscal 2025-26 budget, which includes a likely property tax rate increase to $1.82 per $100 of assessed value.
City Manager Chris McCartt presented the proposed $112 million budget, describing it as a long-awaited investment in roads, employee pay and public services after years of financial strain.
The budget would generate $11.5 million in new revenue and restore key funding streams lost during the pandemic, while helping to keep Kingsport competitive with neighboring cities, he said.
“Everything was indicating that this is where we needed to be,†McCartt said. “We’re not just funding wants; this budget is focused on needs.â€
McCartt said the state is expected to set Kingsport’s new equalized property tax rate at $1.40 in June. Under the city’s proposed rate of $1.82, that would represent a 30% increase over the equalized rate.
Although $1.82 is lower than the current rate of $1.99, most homeowners would still see a tax hike because of significant increases in residential property values following this year’s reappraisal.
Why the increase?
McCartt said the city’s situation has changed drastically since the last property reassessment in 2021, when Kingsport adopted a $1.99 tax rate following a ratio appraisal. At the time, the increase was intended to fund employee pay, but a steep decline in industrial personal property values, combined with overestimated growth projections, erased those gains.
He said the city has now lost a total of $5 million in property tax revenue, including $3.8 million from the 2023 ratio appraisal and a projected $1.2 million from the current reassessment cycle.
“The 12 cents we added for pay is now gone, and we’ve lost even more on top of that,†McCartt said. “We’ve reached the point where we have to replace those dollars and reinvest in the services our citizens expect.â€
To avoid a tax increase in previous years, Kingsport relied on federal pandemic relief — specifically $10 million from the American Rescue Plan — investment earnings and fund balance transfers to keep the budget afloat.
What the new revenue will fund
Of the $11.5 million in new revenue projected, $4.1 million would go toward restoring funding lost following the 2023 ratio appraisal.
That funding originally came from the city’s American Electric Power or AEP franchise fee and had historically been used for road paving, right-of-way maintenance and beautification projects.
During recent years of budget tightening, that money was redirected into daily operations, which McCartt said “robbed Peter to pay Paul.â€
With this reinvestment, the city said it will keep its “worst-first†resurfacing strategy, including a $2.5 million paving initiative in Cooks Valley and other western neighborhoods.
“We’re reinstating dollars we lost — dollars that primarily funded your paving program. This puts us back on track,†McCartt said.
Another $4.5 million would bring Kingsport’s employee pay up to competitive standards across the region. A recent compensation study identified 78 positions that were under market value, along with significant gaps in public safety pay scales, according to Tyra Copas, human resources director.
The recommended budget includes 8% cost-of-living adjustments for general employees, 10% for police and 18% for fire. These adjustments would put Kingsport’s entry- and mid-level positions on par with surrounding cities and help address the city’s recruitment and retention issues.
“We needed to catch up and keep up,†Copas said at Monday’s meeting.
While the plan stops short of offering step increases this year, Copas said the groundwork is being laid to restructure the city’s 20-step pay scale by fiscal 2027.
To help offset a reduction in funding to Kingsport City Schools from Sullivan County, the city would also allocate an additional $1 million, with flexibility to direct it either toward school operations or capital needs. McCartt said the city may delay a final decision on how the money is used until the county finalizes its own education budget later this year.
The extra $1 million would be in addition to the $11,245,300 the city has given annually to the city school system each year since 2020. The school system is looking at a $2 million shortfall between current revenues and expenditures; the proposed move would lower that to $1 million.
Additionally, $1.4 million would go toward debt service on an $18 million bond issue supporting capital projects like Fire Station #2, bridge repairs and building maintenance.
The remaining $500,000 would help support day-to-day operating needs in departments such as leisure services, public works and administration.
“It may not sound like a lot, but $500,000 helps with temporary labor for litter control, programming in leisure services, or even studies that set up future capital decisions,†McCartt said. “It helps in many ways.â€
Despite the new revenue, not everything made the cut. The recommended budget leaves $10 million in additional capital requests unfunded. It also does not create any new city positions, despite 17 being requested.
The budget also leaves out $3.7 million in operational requests from other departments for the next fiscal year.
Where homeowners could feel tax increase
According to city estimates, a home previously valued at $200,000 and taxed at $1.99 would have paid $999 in city taxes in 2024. That same home, if reassessed at $350,000, would pay roughly $1,593 under the proposed $1.82 rate — nearly $600 more per year.
Most residential properties in Kingsport fall between $175,000 and $350,000 in assessed value following the reassessment, McCartt noted.
