Just over two months into the 2025-26 fiscal year, Lexington is hitting pause on some of its budgeted expenses for the year as certain revenue sources are down from last year.
At the City Council meeting on Sept. 4, Lexington finance director Jennifer Bell presented a report to Council about the final report from FY25 and an update on FY26.
In the latter, she noted that collections for sales and lodging taxes collected in July and August are below the amounts collected from the same time the year before.
Sales tax collections, she said, are down 4.1 percent from FY25 and lodging tax collections are down 30 percent from page 8 the same time period. For sales tax, the city collected $122,075 in July, which is just slightly under the $122,248 collected in the same month last year. In August, however, the city collected $92,134, well under the $101,064 collected in FY25 and the $102,516 collected in FY24. It is also below the $115,000 monthly average for the FY26 fiscal year.
Thus far in FY26, the city has collected $114,387 in lodging tax revenue ($59,712 in July and $54,675 in August), a noticeable drop from the $168,828 collected in the same time period last year ($89,487 in July and $74,341 in August).
Bell noted during an interview with The News-Gazette on Friday that this year’s collections thus far are closer to what was collected in the same time period in FY24 and FY23 ($127,418 and $113,550, respectively), which could indicate that FY25 was just an exceptionally good year for lodging revenue.
Meals tax collections showed a 6 percent drop in July with the city collecting $141,857 (down from $151,059 collected in July of 2024), but the city collected $152,998 in meals tax revenue in August, above the $142,587 that was collected last year. With August’s collection being up, the meals tax revenue is slightly higher than last year’s collection by .4 percent.
With these revenue sources trending below budget early in the year, as a precautionary measure, Bell and City Manager Tom Carroll are proposing nearly $400,000 in spending freezes to offset the potential revenue shortfall.
They are going to delay purchasing some vehicles for the Public Works Department and Police Department that were originally budgeted for in the 2026 fiscal year, and delay $100,000 worth of work that was planned at Jordans Point Park.
They have also asked the Department of Public Works, Police Department and Fire Department to go through their individual budgets and find $33,000 each in expenses that can be frozen.
They had also identified some areas where money had been saved, such as $29,000 in health insurance savings, bringing the total savings and reductions to potentially offset the shortfall to $489,503.
Caroll told Council that he didn’t feel there was any cause for concern with the situation.
“This is a watchful waiting, not a ‘the sky is falling’ situation,” he said. “I think what we’re trying to do is take some prudent measures now and revisit this in three or four months, because we can’t unspend the money once we’ve m ade a commitment. This is, I think, a very careful, measured approach simply to make sure we’re trying to live within our budget.”
“We are in an incredibly good financial position,” Bell told The News-Gazette on Friday. “We have a treasury because Council has been very frugal in how they’ve spent money throughout the years, so we have reserves. Even if the revenues are down this year, we could have been just fine and not frozen anything because we could dip into our fund balance. We just don’t want to do that unless it’s absolutely necessary. I would like the citizens to know that all of city staff and Council are working to protect the funds that they entrust us with.”
