A reported .4 million surplus is putting St. Paul Town Council in a tough position, as they now consider a tax increase for 2026.

During budget discussions this week, councillors openly acknowledged what many residents are already asking:

How can the Town show a multi-million-dollar surplus while still considering raising taxes?

“There’s some public that are coming to me… they’re just curious how we can have a $2.4 million surplus and now we’re proposing a 1% increase,” one councillor said.

Why the surplus isn’t what it looks like

Administration was quick to clarify — that $2.4 million is not sitting in a bank account waiting to be spent.

A large portion of it has already been committed.

“We had already earmarked a good chunk of that money to go to certain areas in our budget,” council heard.

That includes:

• Transfers to general reserves
• Capital replacement funding for water and sewer
• Previously planned projects and financial obligations

Once those are accounted for, the Town says the amount of true available cash is much lower than the headline number suggests.

Still a communication problem

Even with that explanation, council didn’t ignore the reality — this is a hard message to land.

There is concern that if the Town continues to show large year-end surpluses while increasing taxes, it risks losing public trust.

“If we raise taxes by 1% and end up with another large surplus, that looks like good management, but it’s really not good budgeting,” one councillor said.

It’s a balancing act:

• Budget too tight, risk shortfalls
• Budget too high, risk of over-collecting

Right now, council is trying to find the middle ground — while explaining it clearly to residents.

Tax increase still on the table

As part of the 2026 operating budget, council is considering a 1% tax increase.

Three different approaches were discussed:

• No change to tax rates
• A 1% increase in overall tax revenue
• A 1% increase to the mill rate

Each option impacts taxpayers differently depending on property values and assessment growth.

The proposed budget currently projects a net position of about $327,000, significantly lower than the previous year’s surplus.

Capital budget adds pressure

On the capital side, the Town faces a shortfall of roughly $101,843 that will need to be covered by operating funds.

Council also discussed the importance of ensuring that reserves are backed by actual cash — not just accounting entries — especially for major future expenses such as equipment and infrastructure.

New idea: taxing vacant lots

Another idea raised during the discussion was introducing a minimum tax on vacant lots.

The goal would be to:

• Encourage development
• Create fairness in taxation
• Generate additional revenue

The idea is expected to return during future readings of the tax bylaw.

More than just numbers

While the final tax decision hasn’t been made, one thing is clear:

This isn’t just about a 1% increase.

It’s about explaining how the Town manages money — and making sure residents understand where it’s actually going.

Because right now, that $2.4 million number is doing most of the talking.