Tuesday, May 16, 2017

Put your budget where your mouth is: Asheville's Priorities

Proposed City Budget for Fiscal Year 2017-2018 reveals
growing bureaucracy and massive debt

For all the talk of lowering taxes and concern over the affordable housing crisis, Asheville City Council and its management has gone whole hog into economic development in exchange for the promise of a massive explosion of growth.  Don't listen to the talk. It's an election year and politicians say what you want to hear. Instead, look at the proposed budget for fiscal year 2017-2018 and you will see exactly where the city puts its priorities - a growing bureaucracy and massive debt. In addition, the City could have lowered the property tax rate to 39.5 but instead, added back 4 cents in taxes.

Growing Bureaucracy

Growing Bureaucracy - 100 new full-time employees
Hidden in this year's budget is a significant personnel change - the addition of 100 full-time positions. This kind of increase has not happened since 2007-2008.

City management has been increasing full-time positions at significant rates for the last 2 years, adding more than 76 new positions. By the end of this fiscal year, it will have added 23 more, bringing the total to 100 new full-time positions.

Keep in mind, Gary Jackson started with the City of Asheville in 2005 with 1,060 full-time employees. Almost immediately he began hiring and by fiscal year 2007-2008 budget, had created 100 additional full-time positions just before the recession.  It appears the City has recovered from the recession and now has again added another 100 full-time positions with this fiscal year bringing the total projected full-time positions to 1,248.

Why is that significant? A growing bureaucracy rarely gets smaller and in the case of Asheville, comes with high salaries and benefits.

Salaries and Benefits - $10.5 MILLION increase
Since 2015 and if this year's budget is approved, salaries and benefits will have increased $10.5 million for a total of $90,481,460.

Property taxes aren't enough to cover salaries & benefits
The City's main source of revenue is the property tax revenue. The City needs every bit of property taxes to pay for salaries and benefits.  The City projects $63 million in property tax revenue for this coming year, making them $27 million short in paying employees and their benefits ($90 million expenditure).  Whatever additional revenue comes in pays the salary shortfall and the rest of the operating expenses of the City.  It's no wonder that the City increased rates on city services this past March, even before this year's budget. They need every penny of parking, stormwater and water revenue possible to pay the remaining operating expenses.

You would think the City has dramatically grown to account for such increases in staff and salaries but really, it has not. According to the US Census, the City's population in 2010 was around 84,000. As of today, it's around 88,000.

Asheville creates new department - Capital Projects Department
Part of the growing bureaucracy and salary increase is due to the new department the City created in February 2017 -  the Capital Projects Department.  The City now has capital improvement projects of over $200 million in the next 5 years.  Essentially, the City has created its own construction management department and become a municipal developer.  This was not necessary prior to 2014 when the 5 year capital improvement program budget was a mere $53 million.  By 2014, that number went up 149% to $132 million when the RADTIP project was approved.

Debt, Bonds & Taxes

What has also grown is our municipal debt and the City has no problem increasing that waistline beyond what its financial frame was meant to hold. The City now has $200 million in planned capital improvement projects now divided into two main categories - the GO Bond CIP of $74 million and the 5 year rolling City CIP of $121 million.

$74 Million Bond
City plans to collect 3.5 property tax but not start projects for another year

Last November, voters approved a $74 million bond to go toward affordable housing, parks & rec, and transportation.  While City taxpayers could have seen a massive property tax decrease, the City instead added back a 3.5 cent tax to pay for the "GO bond debt service."

The problem is this: According to the Local Government Commission, the City of Asheville has not yet made any moves to issue the $74 million bonds as of this writing and apparently doesn't plan to for an entire year.  Therefore, the City will be collecting this 3.5 cent tax for an entire year on bond projects not scheduled to start until FY 2018-2019.  See page 148 of the City's budget.  The schedule clearly reflects the estimated cash flow plan for the GO Bonds.  Only $200,000 is scheduled to be spent in this Fiscal Year 2017. The GO Bond projects will NOT start until Fiscal Year 2018-2019 (that's July 2018 through June 30, 2019). So, why not give taxpayers a break and hold off on the 3.5 cent tax increase?

The amount collected on the 3.5 cent tax will be approximately $5 million.  What will the City be doing with that $5 million in the meantime?

Capital Improvement Projects
$121 million

Even before the GO Bond referendum adding $74 million in capital improvement projects, the City already had a hefty 5 year capital improvement plan of $121 million.  Adding the bonds to this and the City now has over $200 million in capital improvement projects with $34 million expected to be spent this year.

How much in debt?
In addition, this year's budget format has significantly changed.  It is difficult to tell how much of this is being paid for out of general funds and how much will be paid by debt. In last year's budget, the City projected almost $100 million (of the 5 year total) would be debt financed and $19 million to be debt financed just for fiscal year 2017-18.

The proposed budget reveals the City's priorities - a growing bureaucracy with high salaries and large economic development projects putting the city and its taxpayers into massive debt.  In a year when property revaluations may force some to sell, are making affordable housing harder to come by and squeezing fixed income residents even more, the City could have lowered the tax rate even more if it had not added back the 3.5 cent tax for bonds.

Budget Talk
If you wish to comment on any aspect of the City's budget, attend the May 23rd City Council meeting at 5pm. It will be the only time you can give public comment specifically about the budget prior to the June 13th adoption of the budget.

Article by Mari Peterson, Research and Data for Asheville Unreported

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