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Raleigh budget briefing: FY25 on track but sales tax is cooling; council told to plan for compensation study and capital changes
Summary
Raleigh’s finance team told councilors that fiscal 2025 revenues and spending are tracking largely as expected but warned of slower sales‑tax growth, an imminent citywide compensation study and proposed changes to capital planning and bond pacing.
City budget staff gave Raleigh councilors a mid‑year briefing showing overall fiscal 2025 revenues and spending tracking close to plan, while flagging three items that will shape a coming fiscal‑year proposal: a citywide classification and compensation study, a slowdown in sales‑tax growth, and proposals to change how the city plans and sequences capital bonds.
Budget Director Sadia Sattar and Finance staff said the city’s total budget across funds is roughly $1.4 billion and that the general fund — the city’s primary operating fund — is collecting property taxes and fees at expected rates. “Property tax collections are right at historical expectations for mid‑year,” Finance staff said. The mayor and council had previously committed one penny of property‑tax revenue (roughly $11.4 million in FY25) for the study’s implementation.
But staff cautioned that sales‑tax revenue, the general fund’s second‑largest source, has slowed from pandemic‑era highs. “Sales tax is the most volatile revenue source we have,” Allison Bradshaw, a finance director, told the council, noting that sales tax collections must grow faster than last year’s pace for the city to meet FY25 growth assumptions.
On personnel costs, staff reminded the council that a study to review classification and compensation for city jobs is nearing completion and that implementation costs remain uncertain. “We do not know what the total cost of the study is,” Sattar said; she told councilors the HR team expects to present the study results to council in March and that the city will need a plan to phase any implementation.
On capital planning, the finance team recommended a structural change to how the city budgets for major projects. Instead of asking council to appropriate both design and construction dollars at one time, the staff proposed an “advanced capital planning” program in which projects would be phased: council would approve initial concept and design funding, staff would complete preliminary design, and then the council would approve construction dollars once costs are better defined. Finance staff said the change would reduce schedule and cost risk and permit more predictable, smaller bond issuances on a recurring cycle.
Councilors asked for additional detail on enterprise operations such as transit and parking. Staff said transit and parking continue to rebound from pandemic impacts but noted that transit has a structural support level and parking saw a general‑fund subsidy in FY25. Staff were asked to bring enterprise fund details and permit/fee benchmarking to future budget work sessions.
What happens next: staff will return with the classification and compensation study results, additional detail on sales‑tax monitoring and enterprise funds, and a proposal for capital‑planning adjustments ahead of the FY26 budget cycle. Staff also recommended the council consider a small, focused set of capital asks that can be financed without a tax increase but will require prioritization.
Ending
Finance staff said the city has options to invest in priorities next year but urged councilors to be prepared for targeted asks and tradeoffs, and to review proposed capital‑planning changes before formal bond decisions.
