City staff and council members spent the bulk of an Aug. 6 special meeting debating how much to raise Rockport’s property tax rate to cover operating shortfalls, restore reserve levels and support planned capital projects.

Staff reported a structural budget shortfall if the city takes no action: preliminary figures showed the combined general and utility funds would start the fiscal year about $1 million in the red. Staff described a multiyear pattern of deficit spending, declining reserve days and the need to restore a six-month operating reserve the city previously held.

Vanessa (staff) presented modelling showing the impact of small increases to the I&S (interest & sinking) side of the tax rate. Staff said each one-cent increase on the I&S side approximately yields $250,000 of annual debt service capacity and could support roughly $3.5–4.0 million of borrowing, depending on interest rates. Council discussed proposals ranging from a minimal 1‑penny rise (about a 3% overall tax-rate bump) up to a previously proposed 6 pennies (a roughly 25% increase) and considered a stair-step approach.

Staff recommended beginning with a 6% operating increase (to cover a Cost-of-Living Adjustment and pay adjustments) and using any available unused M&O increment from state recalculations to reduce needed borrowing. That 6% operating increase would preserve COLA/COP (certified pay) commitments but not itself replenish reserves. Council members repeatedly emphasized the need for a “stair-step” approach — starting smaller (1–2 pennies) and reassessing after audits and new revenue studies — rather than imposing a large one-year increase.

During the discussion, resident Patrick Kane urged fiscal caution, saying, “So I think it's irresponsible to take us to our debt capacity when we don't have an emergency.” Some council members responded that failing to act risks further reserve erosion and degraded services: one council member said the city “can't keep robbing those capital programs to pay off the other things that we could do if we had a more significant tax rate.”

Council debated priorities for any additional tax proceeds: vehicle and equipment replacement (B&E), a modest capital projects list for year one (staff estimated several $1 million projects need work), a city‑hall contingency buffer and police staffing (including matching for a federal/state grant that could provide additional officers). Staff said the I&S increase must be used for capital (debt-funded fixed assets); it cannot be used for routine operations.

Council members indicated broad support for a moderate course: the prevailing direction was to pursue a stair-step increase that would likely start at two pennies on the I&S side (roughly moving the combined tax rate from about 0.36 to about 0.40, per staff diagrams), paired with the 6% operating increase to cover COLA and pay-related obligations. Staff said they will return with refined figures, the 2023 audit results and a schedule for public hearings and ordinance readings required for adoption.

No final ordinance was adopted Aug. 6; council directed staff to prepare the tax-rate ordinance and related budget materials for the August/September hearing and to run additional analysis on debt issuance timing, interest-rate sensitivity and the effect on debt capacity and reserves.