Asheville staff brief council on FEMA disaster loan, narrowing budget gap and tax implications

City finance staff told the Asheville City Council on April 16 that the city has applied for the FEMA Community Disaster Loan (CDL) program and that other revenue and one-time savings measures have reduced a projected general fund gap for next fiscal year.

The loan application, if approved, could be for up to $5,000,000, and staff said they would return to council for formal approval if the award is offered. Tony McDowell, finance and management services, said the city and FEMA are finalizing the application and that preliminary analysis suggested the city may be eligible for the program—s $5 million maximum.

Why it matters: The loan is one of the few federal mechanisms available to replace disaster-related local revenue loss; applying it to the general fund would reduce the property tax-rate increase staff say will be needed to close the budget gap. McDowell told council that if the city received a $5 million CDL and applied it to the general fund the likely tax-rate increase could fall from roughly 4 cents to about 1.5 cents on the tax rate.

Staff presented updated revenue estimates and one-time savings that also narrowed the projected general fund shortfall. McDowell said the city increased revenue estimates by about $900,000 (including a cost-allocation adjustment that raised transfers from enterprise funds by roughly $500,000) and identified about $500,000 in one-time expenditure savings (including use of opioid settlement funds and increased vacancy-savings assumptions). Those changes reduced the projected gap from roughly $11.4 million to about $10 million, leaving an estimated 10.4% fund balance against a 15% policy target.

McDowell cautioned that the CDL is a loan that would require payback over five or ten years unless Congress forgives it; he said current FEMA-based interest-rate estimates are just over 4 percent, producing interest costs in the $500,000-to-$1,000,000 range over the life of the loan if forgiveness does not occur. He also flagged that the CDL is a one-time revenue source that would not solve recurring structural gaps.

Council members asked whether enterprise funds had available balances to cover shortfalls; staff said some enterprise fund revenues (for example, a Streetcut Fund balance that staff recommended transferring) could be moved to the general fund, but many enterprise funds are restricted and cannot legally be used for general fund operations. McDowell said staff would return with additional fund-balance detail for enterprise funds.

Staff next steps: McDowell said staff expect notification from FEMA in a few weeks and would return to a formal council meeting to seek approval if the award is offered. He also asked council for direction on whether to apply any award to general fund revenue replacement, enterprise fund stabilization, or other priorities.

Ending: Council members signaled interest in using the loan to temper property-tax increases but emphasized the loan—s limits and the need to protect recurring fund balance and other services. McDowell said no council action was required at the work session and staff would bring details back after FEMA—s decision.