Asheville manager proposes FY 2025–26 budget with 3.26¢ tax-rate increase to cover compensation, recovery costs

City Manager Deborah Campbell and Finance Director Tony McDowell presented the city manager's proposed fiscal year 2025'026 operating budget to the Asheville City Council, asking the council to adopt a $256,080,000 plan that includes a recommended property tax-rate increase of 3.26 cents per $100 of assessed value.

The proposed budget, Campbell said, is balanced using a mix of operating revenue, one-time disaster recovery resources and a FEMA community disaster loan. "This proposed budget was prepared in accordance with North Carolina General Statute 159-11 and represents many months of work by staff throughout the organization and by council and the community," Campbell said. Finance Director Tony McDowell highlighted that the package includes a hybrid compensation adjustment and steps toward a fourth shift at the fire department.

The city projects a 2.1% increase in total spending compared with the current year and is asking homeowners with a $350,000 assessed value to expect an average annual tax increase of about $114, or roughly $9.50 per month. McDowell said the city plans a hybrid pay adjustment: a 3% increase for employees earning above the median of $58,000 and a flat $1,740 increase for those below that median; police and fire pay-plan adjustments are handled separately in the proposal.

Why it matters: Asheville continues to recover from Tropical Storm Helene (Sept. 27, 2024), which damaged infrastructure, businesses and homes and reduced near-term local revenue. The proposed tax-rate increase would preserve core services, fund compensation adjustments and maintain the city's policy goal that unassigned general-fund balance remain at 15%.

Details and trade-offs

Campbell told the council the manager's budget relies on several one-time measures. McDowell said a $5 million FEMA community disaster loan was included to help balance next year's books and that staff also expects to use Community Development Block Grant Disaster Recovery funds (CDBG-DR) to support recovery projects. "With the inclusion of that revenue from the loan, staff was able to balance the budget, including those compensation adjustments," McDowell said. Community Development Division Manager James Shelton explained that the city has submitted its action plan for the CDBG-DR grant to HUD and is awaiting approval; he said the city's CDBG-DR action plan does not currently include a dedicated rental-assistance program, although it does include housing-services dollars for counseling and rapid rehousing.

Council members pressed staff on several points: whether additional budget work sessions could evaluate options short of a tax increase; whether more of the fund balance could be used now; and whether the city could include an immediate step to add firefighters to avoid losing personnel trained in disaster response. One council member requested that staff "show the council how to fund this expansion" of fire staffing either via cuts or other adjustments. Campbell and McDowell told council they would prepare additional information and consider a follow- up work session.

Spending drivers and cuts

McDowell said the budget faces two pandemic- and storm-era revenue impacts: a projected 1% drop in the property-tax base and a conservative 5% drop in sales-tax receipts for the coming year. He said salary, wages and benefits account for about 60% of the city's spending and that unavoidable increases in health insurance and state retirement costs are major upward pressures. To close a gap that otherwise would exist, staff identified roughly $5 million in one-time reductions and pauses, including pausing the city's contribution to the other-post-employment-benefit (OPEB) trust, pausing the housing trust fund contribution for one year, and pausing strategic partnership grants. McDowell warned that many of those are one-time measures and that similar choices will reappear in future budgets.

Fire staffing and the fourth shift

The proposed budget includes $205,000 to begin implementing a supervisory structure needed for a fourth shift in the Fire Department, a change intended to reduce average firefighter work hours. The proposal does not add fully funded additional firefighters in year one; several council members asked staff to model adding four to five positions beginning midyear to help retain first responders who gained disaster-response skills during Helene.

Next steps

Campbell and McDowell said council will receive additional materials and that the formal public hearing on the budget is scheduled for the council's next regular meeting, with final adoption slated for the June meeting. Staff also noted that revaluation next year and the limited duration of one-time funding sources mean the council will likely confront another budget decision in the next fiscal cycle.

Ending

Council did not adopt the budget at the meeting; staff plans follow-up briefings and will bring the budget back for a public hearing and adoption votes in June.