Town Manager Josh Ward presented the Town of Highlands’ proposed fiscal year 2025–26 budget, saying the “revenues and expenditures presented within the budget are balanced.” The document totals $40,825,628 and includes appropriations from the town’s fund balances to close current-year gaps.

Ward told the board the proposed budget would appropriate $2,665,632 from the general fund balance, $499,845 from the water fund balance and $2,642,878 from the electric fund balance to cover capital projects, debt service and operations. He said capital spending in the proposal totals $19,899,695, with $13,086,495 expected from three grants.

Why it matters: the town’s general fund reserve has fallen substantially and managers warned the drawdown makes an eventual ad valorem tax increase more likely. The board set a public hearing so residents can comment before a final vote.

Major features: the property tax rate would remain 10.22 cents per $100 valuation for now, with 1.5 cents earmarked for paving. The Highlands Fire Department tax rate remains 1.91 cents per $100. The budget proposes a 3% cost-of-living adjustment for employees, a 6.3% increase in employee health insurance premiums with Blue Cross Blue Shield of North Carolina, and two new full-time police positions to provide three-officer coverage each shift.

Utilities and fees: the proposal increases residential and commercial sanitation rates (residential monthly rates rise $3), and residential water and sewer base rates increase 10%. The usage charge above 5,000 gallons rises from $7.50 to $9.00 per 1,000 gallons. Ward recommended a multi-year approach to rate adjustments to rebuild enterprise fund balances.

Capital highlights: the capital projects fund request includes the Dog Mountain water line and tank replacement ($3,386,495), water treatment plant improvements ($6,672,000), Highway 604 force-main repairs ($1,400,000) and dredging work for the mayor’s lake project ($4,850,000). The electric fund shows $3,230,000 in capital needs, including a $2,800,000 electric delivery substation upgrade.

Board action and next steps: the board voted to set a public hearing on the proposed FY2025–26 budget at the next regular meeting so residents can review and comment. Town staff and the board signaled they will begin longer-term budget discussions this fall to address the structural decline in reserves and possible revenue changes.

The manager and several commissioners said they will examine potential service reductions, efficiency measures and revenue options — including future tax or rate increases — before finalizing the next fiscal year’s plan.