Asheville staff flags $5.4M general‑fund gap, $41.5M in recovery spending; council asked to weigh use of OPEB and possible tax rate options

City finance staff briefed the Asheville City Council retreat on an uncertain fiscal outlook after Tropical Storm Helene, saying the city has spent or contracted about $41.5 million for initial recovery but still faces meaningful revenue shortfalls in multiple funds.

Tony McDowell, finance director, told the council that ‘‘we do expect most of that, spending to be covered 100% by FEMA,’’ while warning that FEMA will not reimburse lost revenues. Lindsey Spangler, the city’s budget and performance manager, said lagged sales‑tax reporting and tourism declines left staff projecting a $5.4 million shortfall in the general fund and a $7.6 million deficit in the water resources fund this fiscal year.

Why it matters: While recovery spending to date is principally reimbursable, the city’s operating budget depends heavily on property and sales taxes, which have been hit by the storm and by prior statewide softening. Staff said some revenue gaps will not be recoverable by FEMA and require local choices that could affect services, fund balance and long‑term credit standing.

Key figures and options: Staff reported roughly $41.5 million in recovery spending or contracts to date, almost $10 million already received under FEMA’s expedited program, and an OPEB trust with about $25 million in assets. As a set of near‑term measures to balance FY25, staff identified about $5 million in savings: delaying or reducing purchases, cutting contracted services, suspending most training and travel, trimming small city‑funded grants and pausing the annual $1.6 million OPEB contribution for up to two years. McDowell said actuarial advice supports a temporary pause: ‘‘you can... stop the payments and then ease back into putting money into that fund, that is something that is financially sustainable.’’

On property taxes and pay: Tony McDowell said roughly $3 million in city property tax remained outstanding in January and staff currently models collecting about half of that amount by year‑end, producing a projected $1.5 million shortfall versus budget. Staff also outlined scenarios for FY26 that tie tax‑rate changes to revenue gaps: roughly 1¢ on the tax rate generates about $2 million in general‑fund revenue; staff showed examples under which a 2.7¢–3.88¢ increase would be needed under various recovery scenarios (staff emphasized these slides were examples, not recommendations).

Credit‑rating watch: McDowell said Standard & Poor’s placed the city on a ‘‘negative outlook’’ (not a downgrade) and that the city has been in ongoing discussions with both S&P and Moody’s. He cautioned that S&P’s outlook reflects concerns about the scale of economic disruption and fund‑balance pressures and said staff will aim to preserve metrics that support the city’s credit ratings.

Next steps: Staff is running updated revenue projections in March, will bring a proposed FY26 budget in early May and expects formal adoption in late June. Council will get multiple work sessions and public hearings; staff will return with recommended savings packages, fee proposals (likely water rates) and a refined view of whether a tax‑rate change is needed.

The retreat closed with council asking staff to prepare a concise ‘‘game plan’’ that bundles the identified savings with timing, impacts on services and additional scenarios for FY26.