ASHEVILLE, N.C. (828newsNOW) — Asheville officials are preparing for the possibility of cutting city services next year as rising costs and slow revenue growth put more pressure on the city’s budget.
In an Oct. 13 memo to department directors, City Manager DK Wesley said the upcoming budget process could be even more difficult than the last one.
“We anticipate the need to ask all departments for budget reductions, likely including service reductions,” Wesley wrote.
No specific cuts have been announced, and city officials say it’s too early to know how much spending may need to be reduced.
In a statement to 828newsNOW, the city said departments are being asked to look for ways to save money and operate more efficiently before any decisions are made.
“While it is too soon to say to what extent rising costs may outpace revenue growth, it is not too early to begin identifying opportunities to innovate, do things differently, and identify efficiencies that will support the delivery of a balanced budget,” the statement said.
The city described the effort as a normal part of preparing a budget.
Another difficult budget year ahead
The warning comes just months after Asheville City Council adopted a $275.8 million budget for fiscal 2027.
City officials began that budget process facing a gap between projected revenues and expenses. They ultimately identified nearly $9 million in savings, including eliminating 16.5 vacant positions, reducing departmental expenses, scaling back some maintenance and returning community center hours to pre-pandemic levels.
The city said those changes allowed it to maintain essential services.
State legislation also complicated the city’s budget process. In July, City Council raised Asheville’s property tax rate from 37.69 cents to 50.78 cents per $100 of assessed value after changes to North Carolina law required the city to use earlier property valuations.
Officials said the adjustment would generate the same overall property tax revenue as originally budgeted, although individual property owners could see different tax bills.
Now, Wesley’s memo indicates departments are still adjusting to reductions made during that budget process.
“The last budget process was difficult and many of you are managing operations in light of FY27 reductions,” Wesley wrote. “We expect the FY28 process to be even more challenging.”
The memo points to rising costs for health care, fuel, materials and other expenses, while city revenue growth remains slow.
Wesley also raised concerns about possible additional restrictions on property taxes by state lawmakers. Property taxes are Asheville’s largest source of revenue, and the memo warns that further restrictions could make it harder to maintain existing programs or improve services.
For now, departments are being told to keep their base operating budgets flat. Any increases in the cost of existing operations generally must be offset by savings elsewhere or submitted separately for consideration.
New funding requests are to focus on existing programs rather than new ones, although new initiatives could be considered individually once the city’s strategic priorities are established.
What could be cut?
An internal budget agenda shows officials are considering asking departments to identify spending that is required and spending that could be reduced.
The agenda discusses an 80/20 approach but questions whether that split is appropriate. It specifically notes that departments are not being asked to cut their budgets by 20%.
The document also leaves open whether personnel costs and enterprise funds would be included in the review.
It does not identify specific programs, services or positions that could be eliminated.
According to Wesley’s memo, department directors were scheduled to discuss potential reduction strategies in late October. Budget staff will then work with departments during November and December to develop proposals.
Those proposals will be reviewed by assistant city managers and the city manager before a recommended budget is finalized.
Sales tax revenue falls short of expectations
The city’s financial records show another challenge: Sales tax collections haven’t kept pace with budget projections.
Asheville collected approximately $39.7 million in sales tax revenue during fiscal 2026, about $1.37 million less than the city had budgeted.
Collections increased about 3.9% from the previous year, but that growth wasn’t enough to meet expectations.
The previous fiscal year had seen sales tax revenue decline about 2.1%.
Compared with fiscal 2023, Asheville’s sales tax collections have increased less than 2%, according to the city’s tracking figures.
The slower growth comes as the city faces rising operating costs and looks for ways to balance its next budget.
The city did not provide a specific savings target for the upcoming budget or identify how much of the financial pressure is tied to sales tax collections.
City promises public input before decisions
Much of the work to identify possible reductions will take place before City Council is expected to approve Asheville’s new strategic plan in March 2027.
That plan will help guide spending priorities and decisions about which programs and services receive funding.
The city says residents will have a chance to weigh in before final budget decisions are made.
“The City Manager’s Office remains committed to an inclusive budget process that is rooted in collaboration and innovation,” the city’s statement said.
“Public input and information sharing will be part of this year’s budget process.”
The city has not said when residents will be able to review proposed reductions or which services could be affected.