Asheville City Council

In a kind of financial dress rehearsal, Asheville City Council members had one last work session to fine-tune the budget for the new fiscal year, which begins July 1.

Judging by the discussion on June 20, the $115 million 2006-07 budget was almost put to bed, but a few sticking points threatened to delay formal approval beyond the June 27 target date, as Mayor Terry Bellamy asked that one item be discussed and voted on separately at a later date.

“I don’t want to vote against the budget just because I don’t like a small part of it,” she said about a proposal to lift the cap on business-license fees.

Paid annually by businesses in the city, the fees would account for only about 0.7 percent of this year’s budget, but proposals to tinker with the formula sparked conflict. The current fees range from $25 to $1,500, depending on a business’s annual gross.

Two ideas were on the table: a staff suggestion to increase the minimum fee to $50 and charge 60 cents for every $1,000 worth of income over $25,000, and a Revenue and Finance Committee recommendation that the city retain the $25 minimum fee and actually reduce the current fees to 50 cents for every $1,000 over $15,000. Both approaches called for doing away with the maximum fee (currently $1,000 to $1,500 a year, depending on the size of the business). Lifting the cap could bring in an extra $300,000 to $500,000 annually, according to committee and staff reports.

But that last point was the hang-up for Bellamy and Council members Jan Davis and Carl Mumpower.

Although Council member Brownie Newman, who chairs the Revenue and Finance Committee, insisted that the move would increase costs for only the top 5 percent of businesses, Davis objected, even questioning the committee’s data.

“You’re getting ready to affect a lot of small businesses without knowing who they are,” he charged. And Mumpower argued that increasing the burden for businesses could be the “straw that breaks the camel’s back” when companies are considering relocating to Asheville.

But with the budget so close to completion, Vice Mayor Holly Jones was reluctant to postpone the matter. (Individual budget items are sometimes resolved after the whole document has been approved, with staff making the necessary adjustments later.)

“I’d like to get this done,” said Jones, so that Council could move on to other issues. She also chided those who were fretting about the impact of eliminating the fee cap, declaring, “It really does a disservice to frame this like it is hurting business.”

Newman, meanwhile, maintained that the move would actually make Asheville’s business climate healthier. “I’m looking forward to giving 95 percent of businesses a reduction when we vote on this next week,” he declared.

Mumpower, however, was concerned about the remaining 5 percent. “We’re talking about penalizing our most successful businesses,” he said.

Staff agreed to bring more information to the June 27 formal session, but it remained unclear whether Council would be able to resolve the matter at that time.

Cause and effect

In what must surely have ranked among the most real-time policy discussions in recent memory, Council members got confirmation of Buncombe County’s decision on this year’s property-tax rate — made that very evening — just as they were in the midst of discussing how to offset the potential revenue loss to the city. The new county rate is 53 cents per $100 of assessed value.

In North Carolina, counties distribute sales-tax reimbursements from the state — either on a per capita basis or tied to the percentage of property taxes each municipality brings in. Because of Asheville’s higher population density, Buncombe County prefers the latter method. Asheville currently collects about 21 percent of property taxes in the county and thus gets an equivalent share of the sales-tax pie. But if the county increases its collections and the city doesn’t, the city’s share of sales-tax reimbursements will decrease — by $1.5 million per year, in this case. (Though rates were lowered, property appraisals went up about 45 percent, so taxes will actually be higher.)

The city now plans to adjust its own tax rate (currently at 53 cents) to offset the loss. And though several scenarios were considered, it was evident that Council members favored the rate recommended by staff: 42.38 cents per $100.

But that figure represents the precise amount needed to make up the shortfall, and Chief Financial Officer Ben Durant recommended rounding the number up to 42.5 cents. With a probably unpopular increase already looming, however, Council seemed disinclined to intensify the political heat by making the increase any bigger.

Filling a seat

When Bellamy was elected mayor last fall, she left her City Council seat vacant. Bryan Freeborn, the fourth-highest vote-getter in the three-seat Council contest, was subsequently appointed to serve out Bellamy’s term. Such a scenario has come up in the last two mayoral races, and Bellamy asked City Attorney Bob Oast to take a closer look at the whole process.

After checking state law and researching how other North Carolina municipalities deal with the situation, Oast repeated what he’d previously told Council: The city charter says that Council can appoint anyone it chooses, though in the recent cases, the candidate closest to making the cut has gotten the nod. State law, meanwhile, stipulates that after a specified period of time, the city can hold a special election to fill the vacant seat.

As the discussion proceeded, some favored continuing the recent practice and possibly even enshrining it in the city charter.

“The community has had a chance to look at the candidate,” Jones observed.

Such a move would require permission from the state Legislature, noted Oast.

Not everyone was game, however.

Davis, drawing on his days as a racecar driver, downplayed the significance of placing fourth. “Anything less than third is a loss,” he declared, urging his colleagues to consider holding a special election if the situation arose again.

Council member Robin Cape worried about the expense and inconvenience of asking folks to go to the polls again so soon after Election Day.

Mumpower agreed, arguing that appointing the next-highest vote-getter is “the simpler solution. People barely show up for the [elections] we have.”

And Freeborn, perhaps speaking from experience, noted that this approach allows a candidate to gamble on the outcome of the mayor’s race and craft a political campaign aimed specifically at being the most successful also-ran.

As for voter turnout, Newman wondered about the efficiency of holding elections at all during off years when bigger-ticket offices aren’t up for grabs. Oast said he thought the timing was tied to state law, adding that some municipalities have managed to find a way around it.

But the discussion was only a start, and Council members said they want to bring the issue to a formal session for public comment before making any further moves.