Some might call the spring “budget season” in Asheville, but the city’s process to allocate funds is a six-month (or sometimes longer) endeavor.
Right now, the city is in the midst of determining its budget for the upcoming fiscal year, FY 2025, which runs July 1, 2024 through June 30, 2025.
If you’re befuddled by some of the financial jargon, here’s your guide to understanding the ins and outs of where your tax money goes each year. Have a question we haven’t answered? Email us at lastnight@bpr.org and we may update our guide with new answers.
Breaking down the basics…
How much money is in the annual budget?
The annual budget changes every year based on revenue from property tax, sales tax, intergovernmental funding, various fees, charges and permits and other miscellaneous sources.
Last year, the city adopted a total budget of around $240 million. The budget is expected to be around the same this year, according to city spokesperson Kim Miller.
How is the money organized?
The city’s finances are organized into three main types of funds: (1) General Fund, (2) Enterprise Funds, and (3) Capital & Special Revenue Funds.
- The General Fund includes much of the city’s day-to-day operations, such as police, fire, refuse collection, street maintenance and parks and recreation. General Fund operations are primarily funded through property tax dollars but are also supported through sales tax revenue, charges for service, license and permit fees and investment earnings.
- Enterprise Funds are used for city operations that are able to turn a profit, including: Transit Services Fund, Parking Services Fund, Water Resources Fund, Harrah’s Cherokee Center Asheville (HCCA) Fund, Stormwater Fund and Street Cut Utility Fund.
- Capital & Special Revenue Funds are used to account for capital replacements and improvement and other services that use specific revenue sources, including: General Capital Projects Fund, Community Development Fund, Water Major Capital Improvement Fund, HOME Fund, Harrah’s Cherokee Center Asheville (HCCA) Capital Fund, Parking Services Capital Fund and Transit Services Capital Fund.
Who ultimately decides the budget?
The city manager, Debra Campbell, is responsible for assembling a proposed budget. The city’s budget division of the Finance and Management Services office assists the city manager by planning, preparing and monitoring the city’s budget for efficiency and performance.
Once the budget draft is proposed, it goes before Asheville City Council for a final approval.
What is the timeline of the budget process?
The budget process begins in September when city staff establish the cost to deliver basic services and decide what new investments are necessary. Then in January, the staff presents these findings to Asheville City Council which uses the identified needs to shape its strategic priorities that will inform the upcoming budget.
In late winter and early spring, City Council holds at least two budget work sessions to discuss the direction of the budget.
In May, the city manager proposes a recommended budget to council.
In June, council provides feedback on the budget and residents get the opportunity to provide input at a City Council public hearing.
According to state law, the budget must be adopted no later than July 1.
What if the city fails to pass a budget by July 1?
If adoption of the budget is delayed until after July 1, the city is still allowed to use funds for paying salaries, debt service payments, and other routine expenses.
Where does the money come from? And where does it go?
How does the city bring in revenue?
The majority of the city’s funds come from property tax and sales tax. This year, property tax is projected to make up 48% of the budget, followed by 26% from sales tax, 11% from service charges, fees and permits, 8% in intergovernmental funding (that’s state, federal and other governmental funds) and 7% from miscellaneous sources.
How are property taxes determined?
Property tax appraisal is handled by Buncombe County. State law mandates the county to conduct appraisals at least every eight years; however, county governments also have the option to reappraise on a more frequent basis.
Buncombe County typically conducts a property appraisal every four years. The last one it conducted was in 2021 – and it’s currently finalizing another appraisal. On Jan. 1, 2025, property owners will receive a new assessed value.
The city taxes property owners at a rate of 40.30 cents per $100 of assessed valuation and the city school tax rate is 10.62 cents per $100 of assessed valuation.
How do fees and rate increases factor into the annual budget?
The city also generates revenue from fees such as water charges or parking fees.
The city typically moves to get fee and rate changes approved separately and ahead of the budget process, according to budget manager Taylor Floyd. This budget season, Asheville City Council voted to approve an increase in parking and water rates in March.
What happens to the money that the city does not spend?
At the end of a fiscal year, any unspent money goes into an unassigned fund balance, which is basically the city’s “savings” account.
The City of Asheville Financial Management Policy recommends that the city maintain a fund balance equal to 15% of expenditures in the General Fund. If the city needs to fund extra expenditures, it can choose to dip into its fund balance, as long as it maintains the required balance. As of June 2023, the unassigned fund balance totaled $28.8 million, according city finance director Tony McDowell.
Can the city invest any of its extra funds?
Yes. The city currently has an investment portfolio with Wells Fargo that totals around $114 million, according to city spokesperson Kim Miller.
Does the city get any money from the tourism tax?
Hotels and short-term rentals in Buncombe County are charged a 6% occupancy tax. These funds do not go to the City of Asheville; they are controlled by the Buncombe County Tourism Authority.
For years, Buncombe County was required to spend three-quarters of its occupancy tax revenue on “destination promotion” and one-quarter on “tourism-related expenditures.”
A 2022 state law changed that ratio, with two-thirds now going to destination promotion and one-third toward tourism-related expenditures.
What are the city’s biggest expenses?
By far, the city’s biggest expense is personnel. The city employs more than 1,300 full-time positions for a total of $172 million, according to last year’s budget.
Operating costs are the second-largest expense, followed by capital and debt and interfund transfers.
Is the city allowed to run a deficit budget? What happens if it doesn’t have enough money?
The city cannot run a deficit with its annual budget, according to state law. If the city needs extra money, it can dip into its unassigned fund balance.
How much debt can the city legally take on?
The city can take on debt in the form of bonds and other financing of up to 8% of its appraised property value, according to state law. As of June 30, 2023, the city had an outstanding debt of $154.6 million, according to city spokesperson Kim Miller. State law allows the city to take on up to $1.6 billion in total debt.
What to expect this year
What are the public input opportunities?
Each budget season, the city kicks off input with a public comment session at the Asheville City Council meeting. Residents can also participate in the budget process by taking a survey – this year’s survey closed in February.
There is no public comment available during budget work sessions, but there is at least one required public hearing before Asheville City Council votes on the proposed budget on June 11, 2024.
The public hearing is scheduled for May 28, 2024.
What are this year’s funding priorities?
Due to plateauing revenues from property and sales tax, the city’s budget manager Taylor Floyd said there is limited opportunity to expand funding beyond its current operational costs. However, Floyd shared that the city aims to increase funding for sanitation services, employee compensation and the Community Responder Program. The cost of the responder program will be partially offset by opioid settlement funds.
In order to generate the funds necessary for infrastructure improvements, the city is also exploring a $150 million bond program.
If passed by voters, the bond program could generate around $150 million and would lead to an estimated $136-175 increase in annual property taxes for the average homeowner.
How does the city approach bonds?
If council decides to move forward with the bond proposal, it would need to go through a multi-step approval process, including several resolutions and public hearings, through the spring and summer before putting it on the 2024 general election ballot.
Felicia Sonmez contributed to this report.
Update: This story was updated on April 11 to include clarification around Asheville's debt and more information about the city's investment program.
