Cape Elizabeth’s proposed municipal budget of over $19.5 million for fiscal year 2026 comes with an estimated 4.85% property tax increase.

The $19,550,647 proposed budget is roughly $871,000, or 4.67%, higher than this year’s.

Cape Elizabeth’s proposed municipal budget of over $19.5 million for fiscal year 2026 comes with an estimated 4.85% property tax increase. File photo / Sentry

The school budget makes up the majority of the town’s overall budget annually in most municipalities. For example, this year’s roughly $18.7 million municipal budget reflected 32.5% of Cape Elizabeth’s overall budget for FY25. If the school district’s budget were to remain the same in FY26, the $19.5 million municipal budget would reflect 34% of the overall FY26 budget.

According to Town Manager Patrick Fox, the proposed municipal budget is greatly impacted by the past use of the town’s unassigned fund balance, of which $850,000 was used last year to offset costs to taxpayers. For that reason, the town was focused on maintaining current levels of service rather than expanding on them or adding additional services.

“We knew heading into this year that even if we kept expense increases low there was going to be a challenge on the revenue side,” Fox told the Sentry this week. “In the last few years, the town has relied on the unassigned fund balance, which is essentially meant to be the town’s savings account.”

Fox said the town’s policy is to maintain roughly one-and-a-half month’s worth of costs to run the school district and town in the unassigned fund balance.

“That would be 12.5% percent of the overall budget of the school and town,” Fox said. “Right now, we’re only at 6%, which is less than a month’s coverage of expenses.”

To build that fund back up, the town is proposing to not use it at all in the FY26 budget. Adding to that is the Town Council authorizing late last year that $200,000 be added to the town’s senior tax relief program.

“This coming year is the first year that will be built into the tax rate to continue that program,” Fox said. “Out of the $871,000 increase, $200,000 of that is for property tax relief for seniors.”

Cape Elizabeth also hasn’t experienced much growth in the past year. So, while the budget increases, the tax base remains essentially unchanged with only $5 million added in taxable property value between FY25 and FY26, which is just a 0.13% increase.

“Some of the greatest features of Cape Elizabeth also make for challenges during the annual budget,” Fox said. “Cape has a lot of land in conservation, beautiful natural resources and quaint neighborhoods — but there’s a very small commercial tax base and very limited growth year to year.”

The finance committee will review the municipal budget, and eventually the proposed school budget, across several workshops in the coming months. The Town Council is scheduled to host a public hearing on the budget on May 5 before voting on it on May 12.