Outgoing Councilman Chris Pelly was not interested in raising taxes. He believed the city should draw down its fund balance, as a lot of taxpayers are having a much harder time saving money these days than cities. The argument used to counter him was that the fund balance of $17.7 million, or 18 percent of the city’s unassigned fund balance, was necessary for the city to maintain a high bond rating to keep interest rates low for its ambitious capital improvement program (CIP). The city intends to spend $142,197,272 on capital improvement projects over the next five years.
Rating agencies not only look at the relative size of a city’s unassigned fund balance, they also look at its rate of growth. Pelly, a real estate broker by trade, noted borrowing rates were at near-record lows and asked how much the tax increase would save the city in interest. CFO Barbara Whitehorn couldn’t even give him an order of magnitude. She did, however, say the most that could be drawn down without making the fund balance fall short of targets would be $700,000. Another question she had to research was Gordon Smith’s inquiry about what the city would have to do to get a AAA rating.
During public comment, Chris Peterson gave his own budget summary, or as much as he could in the allotted three minutes. He faulted members of council for blaming other people and agencies for their budget woes when they had a spending problem. The city’s budget was $153 million, up $20 million from three years ago. What the city pays in salaries increased $12 million over the same time period. It was ironic the city was talking about living wages when the average salary of city employees was $70,000 compared to $30,000 for the average private-sector employee.
Peterson was upset that he had to go to Whitehorn to figure out what was going on with the city’s CIP. She let him know the city’s $2.7 million contribution to Eagle Market Street renovations was part of a $5 million fiasco. Bad concrete pours have to be torn out. Peterson wished the city wouldn’t hide the problem. The black community, he said, ought to be outraged. The fiasco did nothing to save their heritage.
Then, there was New Belgium. “What did we have to give them to get them to come here?” he asked rhetorically. He said he was up to $90 million and counting. Now, the city is asking $5 million to redo the Craven Street Bridge to make way for their beer trucks. In addition to building roads, the city is building greenways for New Belgium that will require ongoing maintenance. Then, on top of it all, the city is going to give the brewers $1.7 million a year in tax breaks. That alone could cover the proposed 1.5-cent tax increase. “Corporate welfare at its worst!” he concluded.
Manheimer foresaw a number of persons in the audience may have shown up to request a living wage for city employees. She therefore confirmed with Whitehorn that, in addition to an across-the-board 1-percent wage increase and other measures to bring city pay more in-line with what comparable governments are paying, the city would pay temporary/seasonal workers a living wage. Jenny Bowen told council she had worked as a part-time/seasonal worker for the city while living on food stamps in subsidized housing. Vickie Meath of Just Economics echoed her request.
A number of nonprofits asked for funding. The city used to make charitable contributions to outside agencies. Now, the funding goes to strategic partners. In former days, it was enough to donate. Now that taxpayers demand accountability, the practice is rationalized as spending on service providers that keep the cost of government down.
To get the conversation rolling, Vice Mayor Marc Hunt suggested splitting the expendable $700,000 from fund balance, allocating $500,000 to Craven Street Bridge improvements and $200,000 to affordable housing projects. Following comments from Smith, he modified the request to $475,000 for Craven, $175,000 for housing, and $50,000 for strategic partners that had received no funding. The city had received requests from seventeen agencies totaling $305,000, but it only had $98,400 to award. Rather than just giving money to the three groups that showed up, Green Opportunities, Asheville GreenWorks, and One Youth at a Time, Hunt wanted the Housing and Community Development Committee to award the additional amount “through a process.”
Smith took issue with the city increasing its grant to the Asheville-Area Chamber of Commerce from $60,000 to $100,000. Funds would go to the Economic Development Coalition to extend the Asheville 5×5 Plan, an effort to recruit employers to the area. He contended the chamber had not been a “consistent partner,” as they did not support the city in its fight against the elimination of municipal business privilege licenses, and they refused to give the city a portion of the pending 2-cent tourism tax increase for its general fund. Smith said members of the chamber ranked transit as their number-one need, and yet the chamber is working against shifting more funds toward transit. Bothwell agreed.
Davis thought council was being very cavalier in the way they were moving the $700,000 around, unless they had had sidebar conversations. It was easy to say taxes would only be going up a few dollars per house, when in fact council was “playing with peoples’ lives that work hard every day.” He suggested funding would be better spent on the 5×5 Plan than the partnerships, as it would create jobs for people to become self-sufficient. As an aside, he said it was not true, and even deceptive, to say the members of the chamber ranked transit their number-one need. Smith and Bothwell had been referring to a visioning session held at the Civic Center where attendees were a somewhat stacked-deck.
Davis, Hunt, and Gwen Wisler argued in favor of giving the Chamber of Commerce $100,000. Pelly and Bothwell supported giving them only $60,000. In addition to his disagreement with recent positions taken by the chamber, Bothwell said the Economic Development Coalition takes credit for things that would have happened anyway. He did not buy the idea that experts were cultivating a climate to attract them. New Belgium, for example, was considering two cities with interstate intersections. Asheville won because it had a great source of water and its workers wanted to live here rather than in Philadelphia. Linamar, a major supplier for Volvo, moved into the old Volvo plant with a turnkey facility and workforce. GE Aviation, also, already had a plant here.
Smith noted the $100,000 deal would be good for the next five years. He did not support an increase, but supposing a majority on council did, he asked “a very discerning eye” revisit the allocation each year.
Manheimer took a moment to explain things for the public. She said the two-cent tax increase was requested to collect funds for the chamber to advertise all the new hotels the city would be getting. She acknowledged she had heard loud and clear the objections of citizens. The tourism trade creates jobs that don’t pay enough, and so the takers end up on government subsidy. It is therefore, “not a great growth area for the economic health of families.” A compromise was to send the money to the chamber’s Economic Development Coalition so they could recruit businesses that pay living wages. Manheimer said it was not right to punish the EDC when council was angry about the room tax distributions. She said no good would come from a stalemate and so she wanted the city to be the “better person” and give the chamber $100,000 while making clear their disappointment.
Council next discussed what they should do with hundreds of thousands of dollars in the affordable housing pot. Smith argued against leaving funds in the broad category of affordable housing until specific needs were expressed. He said some organizations that have become very talented at harnessing city funding are motivated by seeing actual dollar amounts available. Assistant Director of Community and Economic Development Director Jeff Staudinger, at Smith’s request, elaborated on a number of contingencies.
Smith had championed affordable housing earlier when he called attention to an item on the consent agenda establishing goals for creating affordable housing. The recently-completed Bowen Report concluded the city needed 5575 apartments affordable to persons earning no more than 120 percent of AMI; 4175 of which should be affordable to persons earning no more than 80 percent. To address the gap, the city would aim to partner with private developers and nonprofits to build 2800 units within the next seven years. Proposed strategies include requiring developers to price-control a set number of units. If developers can’t afford to do so, then taxpayers would be able to pitch in. Another option the city will be looking into is land banking, a process whereby government buys up land to sell to developers promising subsidized housing.
When Manheimer asked if there was consensus on the award, Pelly said he, “wasn’t quite there yet.” He wasn’t convinced the city would lose its bond rating without a tax increase. He said a tax increase should be a last resort. He felt council owed it to the public to make a case that a tax increase was the only option left. He had heard the city had $700 million in new construction projects coming to fruition within the next four years. He asked if these projects would not add to property tax revenues.
Whitehorn replied there was indeed $550 million in taxable projects in the pipeline. The other $150 million, which included construction projects for Mission Hospital, would not be taxable. Other projects, New Belgium being the foremost, would not be paying taxes for a few years thanks to economic development incentives from the city. The city would lose about $1.1 million annually from existing near-term commitments. Then, only 80-90 percent of the projects in the pipeline are likely to be built. Those that are completed will take 18-24 months to build, and the city would start collecting taxes on the best of them in 2018. She said it was frustrating as a financial manager when “You see all this wonderful growth and you see all these great things happening, and you go, ‘And why do I have no money?’”
Pelly next asked what happens if the state continues to “inflict more damage,” necessitating back-to-back tax increases. The city already raised taxes two years ago. Manheimer said she had talked to City Manager Gary Jackson, and he recommended against deferring the management of recurring expenses. It was, as they say, kicking the can down the road. Manheimer thought city staff needed pay raises sooner than later, and she wanted the city to honor its word to fund payroll, which constitutes a huge chunk of the city’s budget.
Wisler said it would not be a wise business practice to try to squeak by with only the $700,000 margin. Davis agreed, but he did not like the whimsical way council was trying to apportion it. He said this year’s budget for strategic partnerships was built off a figure arbitrarily selected last year. In past years, council had worked hard to winnow away at outside agency allocations because a lot of the organizations making requests could tap other sources of funding. At Whitehorn’s suggestion, council was amenable to leaving the $700,000 in fund balance and moving it around with budget amendments after council had more carefully weighed and considered its disbursement.
Council will vote on the budget at their June 23 meeting. A copy is available through the city’s website.