ASHEVILLE, N.C. (828newsNOW) — Asheville city officials on Tuesday warned of a projected $30 million budget gap as they opened the city’s fiscal year 2027 budget process months earlier than usual, citing rising costs, limited revenue growth and the inability to rely further on one-time fixes.
During a special City Council work session, Budget and Performance Manager Lindsay Spangler said the city faces “a larger than usual gap between revenues and expenses,” prompting staff to begin budget discussions well ahead of the June adoption deadline.
“We wanted to start this process now because of what we’re seeing,” Spangler said. “There could be a larger-than-usual gap between revenue and expenses, and we want to talk through how we got here and what options are on the table.”
Spangler said the city balanced the current fiscal year budget using roughly $5 million in spending cuts, a $5 million FEMA Community Disaster Loan and one-time use of fund balance — strategies that cannot be repeated indefinitely.
City fund balance, often described as a financial cushion, has declined steadily since peaking at about 24 percent after the COVID-19 pandemic, Spangler said. The city ended the last fiscal year below its policy target of maintaining at least 15 percent.
“That makes it unadvisable to continue using fund balance to cover ongoing operating expenses,” she said.
Several cost increases already built into next year’s projections account for much of the gap, officials said. Those include rising employee health care and retirement costs, an estimated $3 million increase tied to a new transit contract, about $1.8 million to fund security at community centers for a full year, and the cost of restoring police funding as vacancies are filled.
Spangler said Asheville Police Department currently has 42 unfunded positions, and improved hiring could require adding at least $500,000 back into the budget.
Debt service associated with voter-approved general obligation bonds, which carry a 2.58-cent property tax increase, is also contributing to projected expenses.
On the revenue side, Spangler said the city expects to set a property tax rate above the revenue-neutral level once Buncombe County completes its revaluation process. State law requires local governments to calculate a revenue-neutral rate following revaluation before adopting any increase.
“We do anticipate that we will need to set the property tax rate above the revenue-neutral rate,” she said, noting the need to fund debt obligations and work toward restoring fund balance.
Sales tax projections remain uncertain, staff said, while fee increases for services such as water, solid waste, stormwater and parking are under review. Officials cautioned that future water rate increases may be necessary due to system repairs and uncertainty over FEMA reimbursements.
Spangler emphasized that the $30 million gap reflects only the cost of maintaining existing services and does not include potential wage increases, public safety staffing expansions or other policy priorities.
“There is no low-hanging fruit that covers a $30 million gap,” she said. “If spending is reduced, that does mean service reductions.”
Several council members described the projections as among the most severe they have seen, drawing comparisons to the Great Recession. Others called for multi-year budgeting strategies and broader advocacy for state-level revenue reform.
Earlier this week, council member Bo Hess later touched on those concerns in a social media post, saying the city is facing a $31 million deficit and warning against relying solely on property tax increases.
“Property taxes alone cannot sustain a city,” Hess wrote, citing uneven impacts on younger residents, working-class households and communities of color during revaluation years. He also pointed to lingering economic effects from Tropical Storm Helene and delayed economic activation downtown.
Hess said the city should examine alternatives such as selling underutilized assets, renegotiating contracts, seeking new partnerships and pausing select programs.
“What we cannot do is continue to balance budgets on the backs of our residents through repeated tax increases,” he wrote.
City officials said public input will begin Feb. 10 during a council meeting, with additional work sessions planned throughout the spring. The city manager’s proposed budget is expected in May, followed by a public hearing and final adoption in June.