MANSFIELD — The ink wasn’t even dry on the city of Mansfield’s final 2026 financial budget before Kelly Converse cautioned local lawmakers about potential new state tax law changes.
The city’s finance director told City Council members the state has convened a committee to consider changes that could impact municipal income tax collections.
“Some of the things they are considering right now are also excluding tips and overtime from municipal taxing, just like the ‘One Big Beautiful Bill Act’ has done at the federal level,” Converse said. “The governor has signed (that) at the state level and they are trying to impose that on the municipal level, as well.”
A greater concern, according to Converse, are potential changes on the business net profit loss tax. The Municipal Net Profit Tax is a local income tax levied on the net profit of businesses.
“They’re also looking at removing the limitation on business net profit loss,” Converse said. “Currently, it’s at 100 percent of a net business profit loss (that) can be carried forward up to five years.
“They want to remove that five-year limitation and allow businesses to carry forward their net profit loss indefinitely until it’s exhausted.”
Converse said the business net profit loss is what’s driving the city’s reduction in overall income tax.
“While withholding is going up and individual receipts are going up, business net profit has declined to such an extent it has taken the entire income tax level down 2 percent,” the finance director said.
“I implore you to talk to your state legislators and let them know at a municipal level, we cannot afford these kind of changes,” Converse said.
If the state makes changes, it would be the second time in recent years.
House Bill 5 in 2014 began to require municipalities to let businesses deduct net operating losses for up to five consecutive years. At first, the deduction was limited to 50 percent of net losses. Starting in 2023, businesses could deduct the full amount lost.
Previously, municipalities could decide whether to allow deductions for such losses and for how long.
The 2026 budget unanimously approved by local lawmakers on Tuesday was about $250,000 lighter than the temporary budget council approved in December.
It calls for $37,480,881 in general fund spending.
The 2025 final budget called for $38.1 million in general fund spending, though the city only spent about $32.1 million from its general fund last year.
The overall budget calls for $3 million in 2026 payroll increases over 2025 in the police ($1.8 million hike) and fire ($1.2 million increase) departments.
The city reached a new three-year contract with the firefighters union in January and Mayor Jodie Perry said Tuesday an agreement with the police unions is expected to come to council in April.
“We had to make adjustments (in the final budget) based on those changes,” Perry said.
“The bottom line was only cut $250,000, but I had to juggle a lot more in there. There were no personnel cuts. It was things like capital projects (being) moved out a little further … things of that nature,” the mayor said.
In a written response to questions from council Finance Committee chairman David Falquette, Converse said revenue estimates for 2026 are flat with 2025.
“However, if we begin to see a decline, the mayor and I will have to decide whether a budget adjustment will be necessary,” Converse said.
“On the plus side, the cannabis revenue offset the reduction to the income tax revenue. A second dispensary would help.
“Obviously, all the positive momentum with economic development will turn the tide, but it will be rough until that development is complete,” Converse said.
