City staff warn of early $30 million FY27 shortfall as budget process begins

Lindsay Spangler, the city’s Budget and Performance Manager, told the Asheville City Council on Jan. 13 that preliminary work on the FY27 budget shows a substantial gap between projected revenues and expenses and that staff brought the issue to council earlier than usual to allow time for options and public input. Spangler said the current balanced budget relied in part on one-time actions last year (about $5 million in spending cuts and a $5 million FEMA community disaster loan) and warned against using fund balance for ongoing operating costs.

Spangler and other finance staff outlined major cost pressures driving the shortfall: an estimated $5–6 million increase in employee health care costs; roughly $0.5 million higher retirement obligations; a potential $3 million increase tied to a new transit contract; about $1.8 million to continue security at community centers; and the need to restore budgeted positions in the Asheville Police Department as vacancies decline (staff estimated on the order of $0.5–1 million but said analyses were ongoing). She also noted the general obligation bond referendum approved by voters in November 2024 carries an estimated tax-rate impact of 2.58¢ (reported as about $6.5 million) that will affect next year’s revenue needs.

Spangler said staff are still refining numbers but presented an early estimate of about a $30,000,000 gap for FY27 and urged council that “there is no low hanging fruit” to close that gap without policy choices. She outlined potential levers: property-tax rate changes (state law requires calculating a revenue-neutral rate once county valuations are available), fee increases (water, solid waste, stormwater), service-level reductions and targeted use of contingency or fund balance (with caution because those are one-time sources).

Councilmembers pressed for multiyear forecasting and peer-city comparisons; finance staff agreed to supply a five-year forecast and to analyze multiyear strategies for compensation and benefits. Council also asked for updated data on Buncombe County’s property tax mitigation program utilization and for staff to model the cost of raising city employee pay to a living wage once Just Economics releases updated figures in January.

Staff outlined next steps and public engagement milestones: a public comment session scheduled for Feb. 10 (moved to a 5 p.m. council meeting for accessibility), continued work sessions on fees and charges through spring, manager’s proposed budget in May and budget adoption in June. No formal budget votes were taken at the work session.

Spangler and finance staff emphasized uncertainty in several areas — especially the final scope of FEMA reimbursements for recovery projects and the precise magnitude of health-care inflation — and said staff will return with more detailed scenarios and trade-offs for council consideration.