Asheville City Council contemplates next year’s budget amid COVID-19 fears

Asheville City Council, city staff and regional and national experts met March 13 for Council’s annual retreat. As in prior years, the meeting aimed to lay out goals, priorities and spending and revenue strategies for Asheville’s government as plans get underway for the city’s fiscal year 2020-21 budget.

But while many familiar challenges faced city officials as they considered the next budget cycle — how to generate new revenue and where Asheville can trim its spending, for example — an unfamiliar cloud hung above the proceedings. Council members and guest speakers alike voiced concern over how the worsening COVID-19 pandemic will impact the local economy and their ability to plan for the city’s future.

“Anybody that follows the economy or follows the news will tell you that there’s a big elephant in the room that we can’t measure, and we’re all thinking about it, and it’s going to affect your planning,” Tom Tveidt, president of Asheville-based consulting firm SYNEVA Economics, told Council members before presenting the city’s latest economic and demographic information. “That being said, I think there will be a pre-coronavirus economy and a post-coronavirus economy.”

Falling short

Tony McDowell, the city’s assistant finance director, explained during his presentation that despite continued growth in Asheville’s property tax revenue, partly driven by the sale of nonprofit Mission Health to for-profit HCA Healthcare, the city’s expenses are still on track to outpace its revenues starting in fiscal year 2021-22, with a projected deficit of $240,000.

Asheville’s general fund is projected to remain in the black for fiscal year 2020-21. However, McDowell said an additional $6.8 million in city revenue projected for next year will go to operating cost increases in areas such as transit, maintenance and pay raises for city employees. Those costs do not include new enhancements to transit or capital improvements.

“There really is a need for additional revenue if we’re going to fund any new capital or operating expenses in next year’s budget,” McDowell explained. He also noted a substantial drop in county sales tax growth estimates — from 7.9% last fiscal year down to 0.9% in the current year — but could not provide a cause for the steep decline.

“There is really not a good explanation for it. If you look at the state data, statewide sales taxes through November are up about 6%, so the state as a whole is still seeing really great growth,” McDowell said. “The longer the trend goes on, the more we think it’s something happening out in the economy.”

Current estimates for the city’s revenue, McDowell said, may also change in the near future as the full impact of the disease caused by the new coronavirus is understood by city staff.

“You all will be pretty close to adopting next year’s budget before we have good sales tax information to see how it’s been impacted,” he told Council members. “We’re monitoring that and we may have to come in and potentially lower revenues, especially sales taxes. This projection was done a few days ago, before we really realized the potential magnitude of what we’re looking at.”

Best-laid plan?

McDowell also noted that a projected $500,000 budget shortfall for transit in the current fiscal year had been reduced to about $300,000 due to recent influxes of grant money. While that may sound like good news for transit advocates, Jessica Morris, the city’s assistant director of transportation, explained during her presentation that the shortfall would still put the city’s projected budget for transit spending behind that required for the service additions recommended in the 2018 Transit Master Plan.

Including the expense of continuing enhancements from the partial implementation of the TMP’s first year and increased costs for paratransit and fuel, the city is projected to spend $12.2 million on transit next year, a $2.1 million increase from last year’s budget. To finish implementing year one and begin year two of the plan — which would extend service hours, upgrade operating software and add and expand routes  — would cost Asheville an additional $2.4 million.

After noting that Asheville lacked dedicated funding for the TMP enhancements beyond the city’s general fund, City Manager Debra Campbell asked Council members to consider directing staff to reevaluate the Transit Master Plan’s schedule and seek new funding sources.

“It’s not a recommendation, but we just want you to think about whether we need to go back and look at the Transit Master Plan and better link it to a funding strategy,” Campbell said. “We are so dedicated to enhancing and trying to deliver what the Transit Master Plan outlines, but we cannot do it being fiscally constrained as we are.”

Mayor Esther Manheimer, Vice Mayor Gwen Wisler and Council member Vijay Kapoor said they supported the idea of “resequencing,” or slowing the deadlines within the plan’s timeline, to align with what they said were more realistic goals.

“I remember the day that I voted for the Master Plan, knowing how aggressive it was, and one of the reasons that I felt OK with voting for it and the timing was that the Mission money was estimated at substantially higher than it actually came in,” Wisler said. According to a presentation by Asheville Chief Financial Officer Barbara Whitehorn last March, initial projections put the city’s new property tax revenue from Mission Health at $5 million for fiscal year 2019-20 and $8 million in following years; those numbers were subsequently revised downward to $2.5 million and $5 million, respectively.

“Now, that money’s just not there,” Wisler continued. “It’s never going to be there, so I think we really do have to go back and relook at the timing under the Master Plan, just because I don’t know how we do it based on the current state of our property taxes.”

“If we’re going to continue to be held to our own timeline, which we can’t meet financially and capacity-wise, that will be a frustrating experience and will continue to be a frustrating experience for us and for transit riders and transit advocates,” added Manheimer.

In contrast, Council members Julie Mayfield, Keith Young, Brian Haynes and Sheinika Smith all voiced support for maintaining the plan in its current structure. That majority bloc asked Campbell and her staff to continue looking into additional sources of funding for the city’s transit enhancements, such as the nonadvertising portion of occupancy tax revenue administered by the Buncombe County Tourism Development Authority, before reevaluating the 10-year plan.

Not easy being green

Chief Sustainability Officer Amber Weaver told Council members that reaching the city’s goal of powering operations through 100% renewable energy by 2030 would be more costly than simply equipping municipal buildings with energy-saving technology. She added that many of the city’s public buildings would require upgrades and maintenance work, such as roof replacements or repairs, before they could support solar panels. Combining the city’s existing capital needs with some renewable energy initiatives, she said, would cost approximately $74.4 million.

Kapoor and Manheimer said they were interested in exploring whether Asheville could pay for the maintenance and improvements through bonds, which voters could approve through a citywide referendum as soon as this fall. “I would love to be able to see a win-win and address some of those [issues], bring down our energy costs and fund it in a responsible way,” Kapoor said.

Meanwhile, Mayfield noted that the city’s budget lacked funding for an urban forester and an Urban Forest Master Plan. Campbell argued that substantial urban forest protection would result from a tree preservation ordinance currently being crafted by the city’s Development Services Department.

“We believe that, with the hopeful adoption of the regulations around tree preservation and the tree ordinance, that is a huge step in terms of preservation, because essentially what that allows this community to do is to regulate trees on private property,” Campbell said. She recommended allowing the ordinance to be in place for at least a year to assess its effectiveness before considering funding an urban forester.

Compensation station

Council members also heard a proposal from city staff to raise pay for all city employees to a minimum of $15 per hour. A similar initiative stalled last year, despite support from Council members, over Campbell’s concerns about wage compression, or creating smaller differences in pay among employees with different skills or experience.

To address this issue, Human Resources Department Manager Larisa Lowman explained, Asheville could raise all employees to a baseline salary of $31,200 while approving additional raises based on years of employment. She estimated that boosting the city’s 92 employees who do not currently make $15 per hour to the baseline salary would cost $409,341, while compression adjustments for an additional 29 city employees would cost $164,965, bringing the total expense to $574,306.

Council members unanimously supported the salary increases for the upcoming budget and directed city staff to continue evaluating how the raises would impact employee benefits such as parental leave and retirement plans.