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From Staff Reports
Asheville City Coucil held a town-hall-style meeting-budget discussion on April 3 to review its looming $6 million budget quandary and to get the public’s input.
The meeting, held in the banquet hall of the U.S. Cellular Center, began 17 minutes late. Council has until June 30 to pass a budget.
Most of the meeting was consumed with a city official’s review of the dire budget situation. However, at the end of the meeting citizens lined up to lobby for the projects that might be cut because of the budget, ranging from the potential closure of the WNC Nature Center to closing the city pools.
In opening the meeting, Mayor Terry Bellamy noted that the large turnout — more than 200 people — indicated that there was much interest in letting people kno what is happening with Asheville’s muncipal budget.
“Y’all being here is so important to the process,” Bellamy told the crowd. “We don’t want to hear some name-calling…. I’ve seen some emails and, ooh, you all haven’t spared the rod.” The crowd laughed.
The mayor said the U.S., including Asheville, have weathered the first major recession since the Great Depression. “We’ve come out of it, but now we’ve to legislators that are doing away with the good work we’ve done.
“We thought we’d put the budget to bed in April... have a few public hearings in May and put the budget away early... We want to be as transparent as possible.
After hearing from a Business Improvement District spokeswoman, who indicated that the group is willing to proceed when council finds the time to be right, Councilman Marc Hunt said he wanted to “extend appreciation for the hard work you guys have done. In terms of formal action, it would have to be at our convened session six days from now…. “
Next, Lauren Bradley, executive director of finance and strategic planning for the city, said, “The purpose of today’s meeting was as a budget work session. We needed a proposed budget public hearing and then the budget adoption.
“In January, we were talking about a financial forecast. As we’ve moved through that process…. Since February, some of that legislation has been introduced …. Although there is some uncertainty about how and what legislation may get passed, we need to start planning ….
“We still have time between formal budget adoption” to make changes necessary to balance the budget.
“Because of where we are and how that budget has changed, council decided to open up this session to the citizens…. These forecasts are not final. They can and will change as we move forward. This is your chance to advice council on where to go as we move forward.
“Over the past several years Asheville has been diligently” working to avoid a budget crossroads. “Before recession, revenues were growing at a rate much slower than our expenses.
“Revenue (was at) 3-4 percent and expenses at 5 percent. It was a pretty small difference, so we could make small changes.
“As we entered into the recession, revenue dropped to 1 percent per year (latest year to 0.7 percent), while expenses (increased to) 5 to 6 percent…. So we really had to look at how to increase revenues.”
Bradley said that one of Asheville’s costly problems is its status of having the highest ratio of daytime to nighttime population in North Carolina.
“Of 40,000 people who work in Asheville per day, nearly 60 percent actually live outside of Asheville. “
She said Asheville, unlike many localities is lacking in revenue sources, although “we do have an occupancy tax, but it is by law dedicated for a different purpose...\You’re sitting in a room that was renovated as a result of occupancy tax grant... So we’re really stretching our property tax base.”
Bradley added, “We cut our budget for 3-4 years… by deferring capital investments. We just put that stuff off. We froze city employee salaries for three years. We also increased city contributions to health care for employees. We also cut travel and training….
“There is an impact and effect for making those decision… We’ve kept our tax rate flat. Our tax rate hasn’t changed over 10 years.
“We’re on a 65-year cycle for street repaving…. The recommendation is 20 years. I’m not sure there’s a city in North Carolina that’s hitting that mark.”
Employee compensation was frozen for three years, she said. The recommended replacement cycle for vehicles is six years. “Our cycle is about 18 years.”
Bradleny noted that there is an impact from the aforementioned tradeoffs.
“So as we enter into the budget planning… with this long-range planning. … What is our ability to affect our rate of growth. … As we enter into planning for fiscal 2014 (beginning July 2013)… we looked at cutting back on some services and also looking at some fees … we were looking at a projected difference of $2.2 million between revenue and expenses.
A forecast is a tool to look forward. We’re required to have a balanced budget.” She stressed the requirement to have a balanced budget several times during the meeting.
She cited the effort to launch a Business Improvement District to provide an “enhanced level of serves for downtown area. … As you’ve seen, they (the BID organizers) actually are pulling their proposal off the table.
She then showed a chart on a large screen that she said helps the citizenry to visually see the city’s financial situation.
Next, she reviewed bills in the state legislaturethat might have a financial impact: “It’s uncertain that these will be passed into law, at this point,” Bradley said.
The following are among bills she cited:
• Unemployment insurance benefits… Requires municipalities to establish a reserve on the state level… It has about a $260,000 impact on Asheville, Bradley said.
• Two bills that establish ETJs…. At some point, as areas urbanize, they might be annexed into the city. There’s about $219K in revenue that we’d lose as a result of that bill.
• Another bill affects local sales tax on food, privilege license fees that we collect. “These revenue sources represent almost $8 million in revenue to us,” Bradley said. “What we assume is that not all of that revenue would go away. … We still stand to lose in the neighborhood of just under $2 million from that.”
• Transfer of the Asheville water system to the Metropolitan Sewerage District. “It would be a $1.9 million impact to the city’s general fund,” Bradley said. “That number is related to the water fund share of central services. There’s a variable portion and fixed portion of the costs. The fixed is $1.9 million. ‘This is an organization of more than 100 employees,” she noted.
• Privilege licenses and beer and excise taxes.
“The city could lose $3.8 million in revenue if all of these bills were passed,” Bradley asserted. “In year two, that projected impact goes to $4.2 million... It can and likely will change.
“So we started this budget forecast at a $2.2 million deficit, with a 1.5 percent increase in revenues and expenditures at two times or 2.5 times higher than revenue,” Bradley said.
The following is her summary of the expenditure side:
• “We were going to freeze or eliminate about 15 positions
• “We had $550,000 in savings from materials budget, etc.
• “Look at city’s role in sponsoring festivals. Bele Chere costs the city about $450,000 to produce.
• “Aston Park Tennis Center and Food Lion Skate Park… There is an alternative proposal to have seasonal staffing during the high points of the year for a savings of about $100,000.
• “On fee side, we put in a $7 solid waste fee.
•”Partnering with WNC Nature Center to see if proceeds from its membership.”
Bradley added, “We could cut $1 million on the revenue side and $1 million on the expenditure side. to meet the projected $2.2 million deficit.
“We were showing revenue growth of about $1.6 million. When you plug in all of the above, revenue would go down $2-plus million. When you take all of those things together, it takes the difference between revenues and expenditures to $5.9 million.
“Now we will be working toward this $5.9 million number.
“In order for us to do that, there are a couple of choices we could make. They could be expenditure side choices or revenue choices.
“We’ve really wrung the towel out as much as we can without raising property taxes. Our ability to find that low-hanging fruit is very difficult at this point.
“On the revenue side, council only has control over property taxes or the other is fees we charge.
“We can’t reach a $5.9m target if we’re only looking at cutting costs,” she said.
“One penny (extra) of property tax would generate about $1 million in the coming year. You’d need almost a 6-cent property tax increase to get there (to close the $6 million gap), if you were doing it only to get there.
“Other possibilities would be to close a fire station… Eliminating Saturday transit service, freezing targeted vacancies in our police dept., reducing street and sidewalk maintenance, closing city pools. If we’re going to address this gap on the expenditures side, these are the cuts we’ll have to make:
• $600K freezing positions
• $530K closing fire station
• $450K eliminating Bele Chere
• $240K eliminating youth programs
• $100K reducing police overtime
“There’s not one item on this list that does not represent a significant reduction in core services for the city,” Bradley said.
“That’s the difficult part of the equation. On the positive side, we are seeing signs” of an improving local economy.
She said the Asheville metro area led the state in job growth from January 2012 to January 2013. Over two years, Asheville rated second in the state for job growth... If we are faced with a more severe budget situation, the city’s role in helping to support this type of economic development” is crucial, she said.. “Asheville is the hub of Western North Carolina.”
Bradley added, “So given where the forecast is involved, we’ve recommended to City Council that we extended out the budget process to allow time for us to see how this legislation goes forward.
Next, council member questioned Bradley.
Vice Mayor Esther Manheimer asked, “In the projected impact, you’ve already made assumptions about” a number of bills getting passed?
“They’re still crunching the numbers,” Bradley replied. “I’d say it’s very possible those projections could change.
Hunt noted that “the general fund budget of the city is what we’re talking about here.The general fund budget was $92 million from 2010. The current general fund budget is $89 million.
“As Lauren mentioned, we’ve squeezed efficiency and taken all the steps. The property tax rate would go up 6 cents. We’ve got a continuing challenge where revenues are growing slower than expenses.
“We have a problem within our city because people choose to live outside the city because it’s cheaper… and this is only going to exacerbate that situation,” Hunt said.
He added that “there are a lot of people in this room that are concerned about parks and recreation.”
Councilman Gordon Smith said that, looking beyond this budget, Lauren. if we didn’t make all of these cuts, with our development of the RAD and SOSLO what are we looking for in the future.
Bradley replied, “I think you’d see that pattern that you’ve seen in recent years ... If this legislation were to move forward, the second year impact would be $5 million. (So the cumulative impact will e $7 million). You might be able to fill the gap in year one, but you’ll face same problem in year two.
“There will be some natural growth that will offset it,” Bradley noted.
Smith asked, “How will this affect our efforts at business recruitment?”
“The business that Asheville’s in is the quality-of-life issues,” Bradley replied. “That’s why people buy homes here. Quality of life. If you start cutting police services, etc., that affects quality of life.”
Bellamy added, “Some of those issues that they would have been investing staff time in go away.”
Bradley said, “There really is no financial flexibility to invest in those projects.”
Addressing the crowd, Bellamy asserted, “We want you (the public) to hear exactly what we hear as elected officials.”
Finally, the mayor opened the session to public comment. “I just want to put an exclamation point on that when we started this process,” she aid.
“What the state is doing to us is something that we couldn’t wrap our minds around, going forward,” Bellamy added. “These projections kind of put a damper on all of those ‘bests.’”
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