ASHEVILLE, N.C. (828newsNOW) — Asheville leaders have narrowed a more than $30 million budget gap for the upcoming fiscal year to about $10.5 million following months of budget work sessions, a city official said Wednesday.

Budget and Performance Manager Lindsay Spangler said the reduction reflects updated revenue projections, department savings and changes in several major cost estimates.

“We came in January with a $30 million gap,” Spangler said in an interview. “Now we’re at about $10.5 million. That’s a typical part of the process. You start with early estimates and then refine them as you get new information and look for savings.”

Spangler said the initial gap was driven by several large, known increases in expenses heading into fiscal year 2027, including a renegotiated transit contract, rising employee benefit costs and debt service tied to voter-approved general obligation bonds.

The city initially estimated about $3 million in additional transit costs, though that figure has since been revised downward. Debt service on the $80 million bond package approved by voters in November 2024 was expected to add about $6.5 million to the budget, after a delay in implementing a related property tax increase last year because of Tropical Storm Helene.

Spangler said health insurance costs remain one of the fastest-growing pressures on the budget, with increases projected at $5 million to $6 million above current spending levels. Retirement contributions mandated by the state are expected to rise by about $500,000.

The city also adjusted staffing-related assumptions, particularly in the Asheville Police Department, where previously unbudgeted vacant positions are now being filled as hiring improves. Those changes added to the overall cost picture, she said.

On the revenue side, Spangler said the city is no longer relying on a one-time $5 million FEMA loan used to balance the current year’s budget, creating a gap in recurring revenue for the next fiscal cycle. She also said sales tax growth has slowed compared with the rapid increases seen in the years following the COVID-19 pandemic.

“After the pandemic, we saw really strong sales tax growth,” she said. “Now we’re seeing much more modest increases, which is a national trend, and there may also be some lingering effects from Hurricane Helene.”

Spangler said the city has closed much of the remaining gap through departmental reductions and efficiency measures, totaling about $7 million in savings.

She said a hiring freeze has been a key tool in managing costs, along with scrutiny of vacant positions and whether they need to be filled. Personnel costs account for roughly 60 percent of the city’s general fund budget.

“We’re really looking closely at every vacant position and whether there are other ways to get the work done,” Spangler said.

City officials are now weighing how to close the remaining gap, which Spangler said will likely require some combination of additional spending cuts and revenue increases, including possible property tax adjustments tied to the bond debt service.

“Really, you either cut more spending or increase revenue,” she said. “If we cut more at this point, it would likely mean bigger service reductions.”

Spangler said the city is still waiting on final property valuation data from Buncombe County as part of the ongoing revaluation process. Once that is complete, staff will calculate a revenue-neutral tax rate and determine the exact impact of any tax changes.

Preliminary estimates presented to council suggest that each penny on the tax rate generates about $2.75 million in revenue. Based on current projections, closing the remaining gap and funding bond obligations could require an increase of roughly six cents per $100 of assessed property value above the revenue neutral tax rate, though officials stress that figure could change.

The city’s general fund budget is currently estimated at about $190 million.

Spangler said the manager’s proposed budget will be released May 8, followed by a presentation to City Council on May 12. Council will then review the proposal throughout May before a final adoption vote expected in June. A public comment session is scheduled for the May 24 council meeting, as required by state law.

“This is the final stretch of the process,” Spangler said. “There’s a lot of back-and-forth with council before anything is finalized.”