The Select Board on Tuesday learned that the outlook for the fiscal year 2026 budget appears to be brighter than previously anticipated, thanks to cuts in requests by town departments and more state aid.

Town Manager Elaine Lazarus told the board that when the FY 26 budget process first began in late January, there was a projected $1.8 million shortfall compared to the town’s revenue estimates. After urging town departments to scrap all but their most urgent requests, she announced that the budget is balanced.

The town’s operating budget is proposed to increase by 3.28%. The School Committee recommended an increase of 5.8% for its operating budget instead of a 6.4% increase, Lazarus said, reducing the amount by $415,000.

She noted that the amount of free cash being used increased by slightly more than $3 million. This money will be used for four main purposes: funding Annual Town Meeting articles related to capital expenses, the special education reserve, the general stabilization fund and other post-employment benefits (OPEB).

“For budgeting purposes, we have to assume that all of the financial requests on the warrant are budgeted,” explained Lazarus. “And so everything on the warrant that asks for money is included. Then ultimately it’s up to the voters as to whether those are approved.”

The recently approved state budget included a 3% increase in the amount awarded to cities and towns. The town originally planned for no funding increase.

Payment of debt principal and interest is up over 40% from last year, which Lazarus described as “the big change.”

Also, the town’s amount of free cash, which was certified earlier in the day, is more than $18 million. Lazarus stressed that the town is not planning to allocate all of it in FY 26. Rather, she asked that it not be used to fund the operational budgets, saving money for infrastructure and capital needs over the next few years. When the excess free cash is discussed, Lazarus said some “nice to haves” could be added back into the budget.

Chief Financial Officer Kyla LaPierre said the $18 million is “not normal.” Last year’s certified free cash amount was $9.5 million.

She explained that $6 million came from American Rescue Plan Act (ARPA) funds that will be used to fund health and insurance benefits. In addition, $2.2 million came from interest on investments that wasn’t projected.

Said LaPierre: “That’s where the big swing comes from this year. And I think it’s important to get that on the record that this is not normal.”

Now that the town appears to be on more solid financial footing, LaPierre said the Capital Improvement Committee can look at projects it didn’t initially recommend. Any projects that receive funding will be based “on priority and need of the town.”

LaPierre also recommended not paying down the town’s debt with the additional money. She explained that the town is actually earning money on its investments due to interest rates. She recommended putting aside money in the capital stabilization fund for upcoming projects.

Member Shahidul Mannan said one capital project he would like to see funded “sooner rather than later” is the adaptive playground. Its estimated cost is $1.2 million.

Chair Brian Herr added that the funds are available for it, “if Town Meeting supports it.”

He cautioned: “But we also need to hang on to as much money as we can, because we still have many years of big, big interest coming at us.”

The board voted 4-0 to forward the budget to the Appropriation Committee (member Joe Clark was absent). It will begin its budget meetings on March 12 and formulate its recommendations over the next few weeks before submitting it back to the Select Board for final approval.

Draft economic development articles reviewed

The board refined the language for the warrant articles it proposed regarding the town’s economic development strategy. They included the creation of an economic development advisory board (EDAB) and an Office of Economic Development.

Mannan, who initially proposed the EDAB, noted that these could be created either by the Select Board or via articles presented at Annual Town Meeting on May 5. Herr suggested that they be created by the Select Board so that they can be “more nimble” in their initial years. Mannan and member Amy Ritterbusch agreed, with vice chair Mary Jo LaFreniere saying it was a good time to do so. After this discussion, the board voted 4-0 in separate votes to remove the warrant articles regarding the creation of the EDAB and the Office of Economic Development.

In a March 13 follow-up email, Ritterbusch clarified that the town has not yet decided about whether to have an Office of Economic Development and/or to hire a development director.

“We removed that article from the warrant and will wait and see how much revenue that fund brings in before we decide exactly how we will spend it,” she explained. “The new committee would advise us. However there is a related article on the warrant to create a special revenue account like Ashland has.”

The EDAB’s purpose would be “to advise the town on strategies and actions to promote economic development initiatives and programs,” according to Mannan. It would seek to attract new businesses that would mesh with the town’s needs as well as retain current businesses, improving the town’s commercial/industrial base

Ritterbusch suggested adding that this board intends to decrease the structural deficit and improving residents’ quality of life. She noted that some residents expressed to her concerns about Hopkinton becoming more commercialized and losing its residential character, which is not what the EDAB intends to do.

The EDAB will consist of seven members appointed by the Select Board, Mannan explained. They must be Hopkinton residents and will include five at-large members, one Planning Board member or designee and one representative from the Hopkinton Chamber of Commerce. Initially, there will be one-, two- and three-year terms to allow for staggered three-year terms in the future.

LaFreniere said the tax base in Hopkinton has traditionally been about 80% residential versus 20% commercial. But now is the time for this to change.

“We need to add something to the commercial-industrial base to help the residents that we do have here,” she said.

All general bylaw proponents will be invited to appear at the next Select Board meeting on March 18 to describe their articles and receive feedback.

Mannan also proposed a nonbinding article that would encourage residents who have private wells to test for PFAS without being obligated to report their findings to the town or to take corrective action.

Ritterbusch asked whether the results would have to be reported to the state or federal government. Mannan said his understanding is that the labs that do the testing have to report it to the state if the PFAS rate rises above a certain threshold, but he would appreciate legal guidance.

Herr said he would oppose this proposal if it didn’t align with policies in other Massachusetts communities.

Said Herr: “If it’s just Hopkinton reporting, it’s going to kill our real estate market.”