I think it’s a horrible idea to take a million dollars out of the rainy day fund.”

Keith Hamilton, Portsmouth Town Council president

PORTSMOUTH — The Town Council is expected to provisionally approve a total municipal budget for fiscal year 2026 of just under $77 million at its meeting Monday night, May 12.

The council spent three nights last week poring over Town Administrator Richard Rainer, Jr.’s proposed spending package, which would increase the tax rate by about 1.49 percent next year.

Pensions/PHS roof repairs

The most contentious moment of last week’s meeting came during discussion on the town’s pension liability. The proposed budget had included $257,163 under the “Other” line item to fund the pension liability and OPEB (other post-employment benefits).

Council member Mary McDowell, however, proposed funding those items over the next three years by taking $1 million from the town’s fund balance. She got the idea, she said, after the council voted April 14 to take money from from the town’s fund balance to pay for part of the roof repair at Portsmouth High School.

“It puts the money in the funds faster so it has more time to grow,” she said. “It reduces the budgeted tax levy this year and also for the next two years for a total of $1 million in tax savings. Town cash is moved from a low-interest cash equivalent to a much more aggressive growth investments.”

Council member Davie Reise agreed, saying that method would save the town money and actually increase its bond rating. 

Council President Keith Hamilton, however, said he “wholeheartedly disagreed” with using the fund balance — also called a “rainy day fund” because it’s normally intended for unanticipated or emergency situations — to pay pension liabilities.

“Our pension liabilities have a plan. They’re documented and planned out over the next 16 years to be fully funded,” Hamilton said. “If we are using our rainy day fund — and a hole in the roof is a rainy day option — it’s less detrimental to our bond rating than utilizing a million dollars to pay for pension liabilities that we are already targeted to completely pay for by 2041.” 

He noted the fund balance should be at about 16 percent of total general fund spending, and Portsmouth’s is at about 11-12 percent now. “I think it’s a horrible idea to take a million dollars out of the rainy day fund,” Hamilton said.

McDowell then asked Rainer about the “expected surplus” the town should have, which could lessen the financial blow.

“We are anticipating a surplus; we have slowed down spending quite a bit,” said the administrator, adding he didn’t want to be pigeonholed into giving an exact figure at this time. “I think we’re looking at a high-six figure.”

Local resident Tom Grieb reminded the council that at one point it was considering taking more than $1.7 million out of the fund balance to repair the PHS roof. (While the school department wanted to go with a 30-year roof, the council on April 14 decided to help fund a 20-year roof.)

“It just shows that we are not looking at our finances properly,” Grieb said.

“Mr. Grieb, I would extremely disagree with that statement,” Hamilton replied. “I think we look at our finances quite well, which is reflected in our bond rating.”

As a compromise, McDowell moved to fund pension and OPEB expenditures by taking $600,000 from the fund balance, while wiping $257,163 from the “Other” line item. The council voted 4-3 in favor, with Hamilton and council members Juan Carlos Payero and Sondra Blank opposed.

Town planner’s raise

Rainer recommended $561,840 for the town’s Planning Department, which included a 7-percent salary bump for Town Planner Lea Hitchen — from $115,280 to $123,350.

Rainer, who said Hitchen “is in high demand” with other municipalities, said he made the recommendation to put the planner’s salary more in line with comparable communities. 

McDowell said she couldn’t support a 7-percent salary hike while other department heads are receiving 4-percent increases. “These kinds of decisions do have cascading effects … and I think you’re going to see that next year,” she said.

Rainer said it was simply a matter of supply and demand. “Our planner is being recruited, folks. We’re not going to be able to replace her any time soon. This is what I’m trying to do to keep her,” he said.

Payero agreed, saying the town “has a hot commodity” in Hitchen and that he has heard directly from other municipalities wishing to secure her services. “If we go out to get a new planner, it will cost us more,” he said.

Council Vice President David Gleason said he didn’t remember “too many 4-percent raises, let alone a 7,” and that he was concerned about future negotiations with union members who are not receiving pay raises that generous. 

Gleason supported the raise for now, however, with McDowell being the sole councilor to cast a dissenting vote.

Council raises

McDowell also was the only council member to vote against giving herself a raise. 

Last year the previous council voted to increase annual stipends from $1,200 to $2,000 for council members, and from $1,500 to $3,000 for the council president. Hamilton said the salary increase is the first change in more than two decades.

The council’s total salary package of $15,000 represented an increase of 72.4 percent, noted McDowell.

“I just don’t think it looks good,” she said before suggesting to reduce the increase to 4 percent. She received no support, however, and the council voted 6-1 to keep the proposed increase.

What’s next?

The council is expected to adopt the provisional budget at its next meeting set for 7 p.m. on Monday, May 12, after Rainer and staff make adjustments based on the direction received last week.

The annual budget hearing is set for 7 p.m. on Wednesday, June 11, most likely at Portsmouth Middle School. The council will formally adopt the final budget on Monday, June 23. Changes to the spending plan can be made by the council in public session any time between now and then.

There are also regular council meets scheduled for Tuesday, May 27, and Monday, June 8, at Town Hall.