Asheville staff outline $11.4 million budget gap; 4.65¢ tax-rate increase proposed to restore 15% fund balance

Asheville City budget staff presented council members with updated revenue and expense projections on March 25 and said the city currently faces an $11.4 million shortfall for the coming fiscal year.

Budget Manager Lindsay Spangler told the council the shortfall reflects lower projections for property and sales tax revenue alongside unavoidable expense increases. “we're gonna need to do both some budget reductions and also a property tax rate increase in order to both balance and to keep our, fund balance at the recommended level of 15%,” Spangler said.

The gap and why it matters

Spangler said the city has identified about $4.4 million in recommended cost reductions and instructed departments to keep operating budgets roughly flat, but staff still see roughly $4.1 million in unavoidable expense increases — largely health-care and state-mandated retirement costs. Even after the proposed savings, Spangler said, expenses outpace revenue by about $11.4 million. Using fund balance to fill that gap would reduce the fund balance to about 10%, short of the city’s 15% policy.

To restore the fund balance to the 15% policy level, staff calculated the city would need an additional $9.4 million in revenue. Spangler said that amount translates to a 4.65-cent increase in the property tax rate and would cost the average Asheville homeowner about $163 per year based on staff estimates.

Revenue uncertainty tied to storm recovery

Spangler walked council through updated economic indicators and recovery spending tied to the recent storm (referred to in the session as Helene). She said unemployment spiked immediately after the storm and remains above pre-storm levels, though state commerce officials expect employment to return to earlier levels by year-end. Sales tax collections remain below last year’s totals — roughly 6% down year-to-date, she said — and the city is treating sales tax estimates as a range because of uncertainty.

On storm-related spending, Spangler reported the city has spent about $23.3 million so far on response and recovery (personnel, operating and capital), with an additional $17.3 million under contract. She said the city has received about $10 million in FEMA reimbursements and expects a state bridge loan of roughly $2.8 million that can be used on FEMA-eligible expenses while reimbursements are processed.

“Sales taxes … were already down prehealing, and then you had the big decrease in September and October,” Spangler said when summarizing the revenue picture. She added that the county — which collects property taxes for the city — estimates the city lost between $1 million and $1.5 million in property-tax revenue compared with last year, a figure staff are continuing to refine with county officials.

Options staff presented

Staff told council they will return on April 8 with more refined projections and additional revenue options. Spangler said staff continue to review funding alternatives and hope to reduce the size of any tax-rate increase before the manager’s proposed budget is filed in May.

Council discussion and next steps

Councilmembers raised questions about the timing of revenue assumptions, the effects of a possible county revaluation next year and whether additional program-level cuts could narrow the revenue need. City Manager Deborah Campbell and budget staff said they are reviewing potential revenue sources and will return with updated numbers.

Campbell and Spangler told council the city will present the proposed budget in early May and hold another work session April 8 for follow-up. No formal vote or ordinance was taken at the March 25 session; staff sought direction on continuing to refine compensation and revenue scenarios.

Ending

Staff emphasized that projections remain uncertain and that the April 8 session will include updated numbers on revenue options and a more detailed breakdown of the items that could reduce the city's need for a full 4.65¢ tax-rate increase. Council members asked staff to prioritize clear, department-level vacancy and projection reports ahead of the next meeting.