Buncombe’s budget outlook ‘not quite as dire’ as initially thought

After Tropical Storm Helene, budgets are down across the board in Buncombe County. Clarity on how much and for how long is slowly coming into focus for the Buncombe County Board of Commissioners after staff presented updated revenues at its budget work session March 20.

For the current fiscal year, which ends June 30, the outlook could be worse, said Budget Director John Hudson. Staff projects county revenue will come in $15.6 million under what was initially projected last summer, far better than the up to $25.7 million drop staff feared was possible in January. Buncombe County’s $440 million budget this year relied on $428.9 million in expected revenues, with the rest being covered by reserves.

“It’s still not where it should have been pre-Helene, but it’s not quite as dire as we thought it might be in January,” County Manager Avril Pinder said of current-year revenues.

Next year’s numbers look similar. Hudson said staff expects fiscal year 2025-26 revenues to come in about the same as the current year, at about $413 million. That’s $15.8 million lower than the initial budget for this year.

It’s not yet clear how the reduced revenues will affect county services next year, as commissioners won’t get a projected budget complete with expenditures until its April meeting, but some clues can be gleaned from the emergency cuts commissioners passed in January in an attempt to balance the current year’s budget.

County management sliced 4% from most county departments, as well as 4% from both public school districts, to make up $17.6 million in reductions. Hudson told commissioners March 20 that if they hadn’t made those cuts, the county would be left drawing $30 million from its fund reserve, almost certainly affecting the county’s bond rating, which it relies on to borrow money.

If those cuts wind up being more than the expected $15.6 million shortfall, it could reduce the county’s use of the fund balance this year. Since staff won’t know exactly how much revenue it has until the end of the fiscal year, it will be difficult to reallocate excess funds to departments, Hudson told Xpress after the meeting.

Property taxes

The county relies most heavily on revenues from property taxes, which account for about 65% of its general fund budget. This year, if the county maintains its current tax rate, Hudson said revenues will come in about $5.1 million short on property tax total, due in part to its adjusted goal of collecting 98.25% of billed taxes. Typically, the county is able to collect 99.75% of all billed property taxes. The decrease this year, due to the storm, accounts for about $4 million in lost revenue, Hudson said.

Hudson used that same lower tax collection rate — 98.25% — to estimate next year’s property tax revenue, which is projected to be $8.7 million short of this year’s initial prediction.

The county is likely to see an increase in property tax revenue in fiscal year 2026-27 after the tax reappraisal — delayed a year because of Helene — is completed in January.

Increasing the property tax rate, currently set at 51.76 cents per $100 of assessed value, is one of the commissioners’ only tools to increase revenue. They could consider that option to help balance next year’s budget in June. Among the state’s 11 most populous counties, only three have lower tax rates than Buncombe, according to Hudson’s presentation.

Other revenue

Sales taxes, which represent the second-largest unrestricted revenue source for the county at about 11% of its budget, are also volatile after Helene.

Since there is a three-month lag for when the county sees data on sales tax receipts, it is still relatively unclear how much Helene continues to impact businesses. According to the latest numbers, staff projects sales tax revenues to come in $2.5 million short of expectations, Hudson said. That number is better than staff predicted in January because the pool of sales taxes the state shares with all counties showed growth in the last few months of 2024, even though sales tax receipts were down in Buncombe County.

Sales taxes are projected to be down $1.1 million next fiscal year, compared with initial projections for 2024-25, Hudson said.

Other revenue changes affecting next year’s budget include a decrease in intergovernmental revenue, a decrease in funds from building permits, less revenue from vehicle purchases and decreasing returns on the county’s investment portfolio due to a weakening stock market, Hudson said.

Recovery funding

Buncombe County has spent about $16.8 million on disaster recovery-related functions, with another $11.3 million obligated to be spent in the coming months, according to its Helene spending dashboard.

To help offset those costs, the county has received $8.45 million through the state’s interest-free cash-flow loan program to use for disaster-related activities as defined by the  Federal Emergency Management Agency (FEMA). That’s part of $100 million the state allocated to counties in WNC based on the amount of damage each incurred.

As of the application deadline Feb. 14, Buncombe County had incurred $68 million in damage and Buncombe County Schools had another $3 million in damage. Asheville City Schools did not apply by the deadline. Currently, counties are expected to start paying back the loans next fiscal year.

Pinder said the county is still exploring how these funds can be spent. She hopes the state will allow the county to use the funds for disaster-adjacent expenses such as recouping salary paid to employees reassigned to disaster assistance roles, rather than only FEMA-approved reimbursement.

It’s unclear statewide exactly how these funds are supposed to be spent, Pinder said.

Hudson said the program has about $34 million left, so it’s possible that the county could get another disbursement somewhere in the ballpark of $4 million.

Commissioner Martin Moore said he is frustrated at the lack of guidance and funding from the state on this program.

“We’re all asking the same question, and this is not enough money. It’s not going to be enough money.”

The next county budget work session is scheduled for Tuesday, April 22.