Asheville City Council began its annual planning process Friday afternoon with a stark assessment from the city’s top management: The recession has exposed “structural weaknesses in the city’s financial foundation” that will require a long-term City Council strategy to repair.
In a white paper titled “Asheville, NC 2010: A Financial Crossroads,” City Manager Gary Jackson and the city’s top managers lay out the city’s history. The report, drawn up last October, explains how factors such as annexation, population growth and state and local tax structures have impacted city finances. The managers’ aim was to detail the disparity between the city’s goals and the funding it has to execute those goals. The seven-member City Council, which includes three new first-time members, plans to discuss the report on Saturday as part of its retreat meeting.
The report shows that the city has lived off ever-increasing sales-tax revenues driven by population growth and the city’s status as a tourist town, as well as steadily rising property-tax revenues, the result of the city’s reputation as a desirable place to live.
The recent recession knocked those revenues down to historic lows, the report adds, noting that Asheville’s slow pace of annexation is also now a factor in its financial weakness. City Council resorted to short-term fixes last year, including cutting positions and spending $2 million of taxpayers’ money normally held in reserve to balance the budget.
“Unprecedented economic conditions certainly necessitated some short-term approaches to balancing the city’s budget; however, at the same time, they exposed structural weaknesses in the city’s financial foundation that were previously compensated for by strong growth in property values,” the report states.
“Now that the country has experienced a significant correction in real estate values and a slowdown in new construction, and the revenue picture shows no signs of improvement in FY 2010-11, Asheville must explore alternative approaches to balancing its revenues with the needs and expectations of its citizens.”
The report also highlights the fact that Asheville has a highly engaged citizenry, which has led to significant strategic-planning efforts and an expectation from residents that plans adopted by City Council be executed. City Council would have to spend an estimated $10 million a year over the next 20 years to fully implement all the priorities identified as the community’s priorities in the 16 plans Council has adopted over the years, according to the report. The plans focus on everything from river redevelopment and affordable housing to sustainability and combating homelessness.
City Council now faces a revenue shortfall of more than $5 million in the coming year if it plans to maintain the current level of services. The city must adopt a balanced budget for the 2010-11 fiscal year by July 1.
In their report, the city’s management offers up two possible solutions. The first is “to choose to be a low-tax, low-service community, cutting expenditures, programs and services as necessary to maintain balanced budgets each year.”
The other alternative, according to the report, is “to embark on an aggressive legislative and community process to build a diverse and balanced mix of revenues.” First steps could include an extension of the quarter-cent sales tax approved by the state, and exploring a bond program “combined with access to other revenues that tap the regional and tourism population as a means of bringing tax equity to Asheville citizens,” the report states.
Go to the Xpress Files to read the white paper and a related document showing the city’s strategic plans and their estimated cost.
— Jason Sandford and Brian Postelle