Council Inconsistent on Multiplier Theory

June 7, 2015 Asheville , City - County Gov. , Columnists , News Stories 1282 Views
Council Inconsistent on Multiplier Theory

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The talking point is the city needs to raise taxes to compensate for the General Assembly’s abolition of municipal business privilege license fees. Staff projected the city would lose $1.5 million from the measure, and yet the budget report’s line item for licensing and fees shows only a $624,016 loss. The city’s position on the discrepancy is that business is booming with a greater volume of applications for permits and licenses.

During the meeting, Councilman Cecil Bothwell complained that the elimination of municipal business licenses was a perk for Walmart. Gordon Smith observed that the state was still charging its business licensing fees, and Mayor Esther Manheimer said the irony in that was not lost on her, either.

Speaking of irony, council awards tax breaks and cash incentives to recruit businesses. The budget report expressly says the Economic Development Department’s 2015-2016 budget was expanded $538,000 for payouts to Linamar and New Belgium. When council wishes to give favored businesses tax dollars or tax breaks, they argue the investment will multiply with outrageous returns. Somehow, any return from the tax break the state was affording all businesses equally escaped notice. Staff also recommended upping the city’s contribution to the Asheville Economic Development Coalition and the Asheville 5×5 Plan by $40,000, to $100,000.

During council’s meeting, the city’s third-quarter financial report was presented. Councilman Chris Pelly noticed the report said revenues for this year were projected to come in $1.1 million overbudget, with expenditures coming in $1.1 million under. He asked CFO Barbara Whitehorn how a $2.2 million surplus translated to a need to raise taxes.

Whitehorn explained that in addition to revenues and expenditures, the city had taken $2 million out of its fund balance. In the coming year, a continuation budget would therefore be $2 million higher than last year’s adopted budget, and the $2 million removed from the fund balance would have to be replaced. Fund balance appropriations for the year consisted of a $10,000 award to the WNC Diversity Engagement Coalition, $48,500 for energy-efficient lighting for the city’s community centers, a $55,000 energy assessment for the US Cellular Center, $60,000 to repair the roof of the Thomas Wolfe Auditorium, and $45,018 in civil service legal fees.

The city will further increase its revenues by adjusting user fees, reducing the amount of tax-funded subsidy. Next year, citizens can expect to pay $3.50 more each month, or $10.50/month for solid waste collection. The move is expected to increase the city’s revenues by $1.1 million. Water rate adjustments all-told are expected to raise $465,000 for the city. Patrons of the Aston Park Tennis Center and the WNC Nature Center will be paying more of their personal freight as well.

Other increases in the budget correspond to recommendations from studies. In April the findings of the city’s Classification and Compensation Study were released. Segal Waters Consulting was contracted to help the city with recruitment and retention. Following their recommendations, the city will invest $1.15 million bumping up pay for some of the city’s most undercompensated. Another $500,000 will pay for an across-the-board 1- percent pay increase. Also significantly, the city will spend $250,000 bringing pay for its temporary/seasonal workers up to a living wage. The city continues to be responsible in setting aside reasonable amounts to cover promised pensions.

In March, Matrix Consulting released the findings of its study of the Asheville Police Department. As a result, the department will be hiring an administrative services manager, a deputy chief, and technicians for helping with the evidence room. Talent from the city’s finance and HR departments will now have responsibilities in the police department. The city will also invest in recommended training and development. It is estimated the changes will cost $157,000, a portion of the amount being offset by a departmental hiring freeze.

Ten people will be hired for the city’s stormwater mitigation activities. Six of these hires will constitute a dedicated work crew to be paid with $240,000 resulting from a 5-percent increase in stormwater fees. In the fire department, three new inspectors will be hired, the expense of whose salaries is expected to be offset by the fees they collect. One new guy will oversee the city’s greenways and another will administer city council’s recent decision to regulate short-term rentals. The Economic Development Department will get full- and part-time reinforcements, and three more positions will be created for the Development Services Department. All told, the city will add 24.63 positions.

The city will move forward with the capital improvement plan presented in 2013, for which a 3-cent property tax increase was put in place. City Manager Gary Jackson projected capital needs are in excess of $400 million, but the city can only spend $142,197,272 over the next five years. About $26,241,588 should be spent on capital projects this year. $1,250,000 will go toward affordable housing, and almost $3 million will be spent on the Eagle Market Place development. A smidgeon will go toward creating a new fire station, a little over $2 million will be invested in parks facilities, and $5.5 million will go toward multimodal transportation projects.

Outside of the city’s general operating fund are its enterprise funds. These are government businesses that run off their own fees. The Water Resources Fund continues to move forward with an extensive capital improvement plan to address years of neglect in the system. Harry Brown continues to be an unsung hero as he leads the city’s Parking Services Division. Parking Services continues to subsidize the city’s bus service with $616,875 a year. Transit will get an additional $1,790,117 from the city’s general fund and about $3 million in state and federal grants. Collections from users are only expected to be about $810,000, this year’s totals evidently falling way short of the $925,000 projection.

The city’s annual debt service is expected to remain unchanged, around $12.7 million a year. Whitehorn announced the city was the very first in the state to float green bonds, also known as climate bonds. These financial instruments are issued for projects promising “climate change solutions.”

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