How will Lexington’s mayor and council settle budget priorities this year?
In the years following the COVID-19 pandemic, Lexington saw dramatic growth in its city revenue.
Federal stimulus money from the CARES and American Rescue Plan acts gave cities millions of dollars to keep the economy afloat.
The momentum from jobs coming back online and increased wage growth after 2021 meant Lexington earned much more revenue than it had planned for several years in a row, adding extra money that could be spent on parks equipment, street improvements and new services.
But that chapter is coming to a close, according to Mayor Linda Gorton and her budgeting staff.
Economic uncertainty at the federal level, slow job growth, the closing of federal stimulus funds and rising utility costs mean this year’s budget will give the city less to work with as they build the next budget.
“We’re asking the divisions to look at the things that they have to have, not the things that they really wish they could have,” Gorton said during a joint retreat with the Urban County Council to discuss budget priorities.
Maintaining existing services as best as possible is the mayor’s main priority.
“We’ve met with all the division directors, they understand what the outlook is — that it will be a little tighter than normal.”
Gorton will present her proposed budget to the council on April 14. The council will then revise the proposed budget before approving it in early June.
From fiscal year 2022 to fiscal year 2026, the city averaged 7.3% growth in the city’s payroll tax revenue. Payroll tax earnings typically make up 56% of the city’s general fund.
But next fiscal year, which begins July 1, the administration is expecting to see 3.6% growth in payroll withholdings.
That slower growth means divisions throughout the city are expected to submit requests that are tighter than past years and make cuts in certain areas of their budget they don’t always fully spend most years.
Additionally, the mayor is not planning to add any new staff positions or major services to the upcoming city budget.
“Over the last five years, we’ve added $88.5 million (in personnel costs) to the general fund.” city Commissioner of Finance Erin Hensely told the council.
Those costs include newly created positions as well as across-the-board raises and salary increases for hard to fill positions.
The only veto Gorton has issued against council in her two terms as mayor have been against the council adding 10 new positions to the fiscal year 2025 budget.
Council ultimately overrode her veto in an 11-2 vote.
A similar spar could come this year, as several of council’s top priorities include new positions inside city hall.
One of the top priorities for council is establishing a new development liaison position, which would help developers navigate various governmental regulations and processes required to get a development plan finalized.
A 2023 study of the city’s planning processes recommended that very position be created.
Lexington for Everyone — a land-use advocacy group that pushed for the 2023 expansion of the urban service boundary — recently highlighted that position as a top need to address Lexington’s housing crisis.
“We feel like if we’re serious about building housing, that we need to make the planning process as easy and streamlined as possible, and that a development liaison who could help walk developers through the process,” 11th District Council member Jennifer Reynolds said of the position.
The council’s general government and planning committee will discuss the idea for the position in its March 10 meeting.
Some council members also discussed adding a position in the social services division to help administer opioid settlement dollars.
As part of a national settlement between Kentucky and pharmaceutical companies, Lexington will receive at least $14 million over the next 15 years. The city has roughly $8 million of that money on hand, Gorton said during the retreat.
The opioid abatement commission met over the course of 2024 and 2025 to create recommendations for how best to spend those dollars. Those recommendations will be presented to the council in a March 24 council meeting.
The council feels an additional position could help the division manage the settlement money, as well as help overseeing newly adopted regulations for sober living homes. How the mayor and council handle investment in existing and new services will also be tricky to navigate.
After the city invested $3.5 million in winter response last year, only to see snow and ice cover Lexington streets for two weeks following Winter Storm Fern, Mayor Gorton has promised to bring a new plan for tackling winter weather next year.
How much that plan could cost is up in the air.
A task force on homelessness is meeting currently to create recommendations for how Lexington can best serve the city’s homeless population.
A 2025 study, from which the task force was created, recommended the city build a new emergency shelter for homeless residents
The study estimated $22 million in upfront costs for the shelter, as well as a roughly $2 million annual allocation for operation.
Several council members who voted against the city’s contract for a new city hall in December said resources would be better spent on this emergency shelter, as well as other recommendations from the task force.
Gorton told the council that she has requested money from the state legislature to help the city tackle homelessness.
“The issue is going to be how to fund whatever the (task force) recommendations are, and probably our current budget can’t handle that,” Gorton said. “So we’ve been asking the state for different types of pocket money.”
The developer liaison could be paid for through a fee that could help developers expedite approval for a plan, 10th District Council member Dave Sevigny floated.
Even as federal cuts across departments make grants harder to acquire, and the state government is pursuing a tighter budget this year, there are still opportunities to leverage what funds do continue to exist, At-large Council member James Brown said.
“Looking at multi-faceted solutions and trying to create efficiencies — there’s other ways to fund priorities. I think we’re open to that,” he said.
“I think the (budget) recalibration could scare people, but I think it’s a commitment from the administration and the council that there’s no reduction to basic services.”
Gorton started and ended the retreat by arguing the tighter budget environment is nothing new for the city — if anything, it’s a more normal process than has gone into most post-COVID budgets, she said.
“We’ve seen these budgets vary a lot, and so this is what I think of as more of a normal budget,” Gorton said.
“We have done this before. It’s not new, but we will be fine.”
