Charlotte council members heard options Wednesday to cut expenses, shuffle costs to special funds, increase fees and raise property taxes as they try to close a $21.7 million budget gap left by a tax cut and a surprise drop in property tax values.
The cuts could mean less training and travel for city employees, eliminating frozen positions and less money for groups like the Arts & Science Council. But that won’t be enough to close the gap. Charlotte City Manager Ron Carlee said departments are looking at service reductions and the possibility of job cuts, but that he wasn’t ready to discuss them publicly yet.
“The next round is going to be more painful,” Carlee said of potential cuts. Staff will present options for service reductions at an upcoming meeting.
To replace lost revenue, the city could raise property taxes. City Council would have to raise its property tax rate about 5 percent – by 2.44 cents of every $100 of taxable value – to completely close the budget gap. That would mean additional taxes of $36.92 for a homeowner with a home value of $151,300, the median value, or $58.85 for a home worth $241,200.
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Council member Ed Driggs balked at the idea of a tax increase.
“If the subject of tax increases even comes up, people will say ‘We never hear about a tax cut,’” Driggs said. “If we have a windfall, we find a way to spend the money.”
Carlee stressed that all of the scenarios and options presented Wednesday are preliminary, and are not recommendations – just information for council to consider as the budget process moves forward. The numbers are likely to change, Carlee said.
City Council is facing the general fund shortfall following the loss of the Business Privilege License tax after its repeal by the N.C. General Assembly. And adjusted appraisals surprised local officials with lower-than-expected property tax revenues, following the county’s botched tax revaluation.
The shortfall amounts to 3.7 percent of the city’s general fund. Charlotte’s $584 million general fund pays for basic services such as police, fire, garbage collection and roads.
Carlee said departmental budgets for travel and training were already reduced during the recession. He said the city will avoid further cuts that would “functionally incapacitate us,” but that department heads have told him there’s not much fat left to trim.
In an earlier budget meeting, Carlee proposed no pay raises for employees for the upcoming fiscal year and a 1 percent cut among all departments. He has put a hiring freeze in place, Carlee said.
Some council members also said they should look at some of their own expenses. Vi Lyles mentioned the group could change its meeting times to avoid a $7,700 cost for meals provided to council members.
“I think we have a responsibility as elected officials to share some of the burden as well,” said Al Austin.
Some council members also balked at new funding requests from outside groups, such as a third-grade reading initiative for which the Foundation for the Carolinas is requesting $100,000. Some said Mecklenburg County should absorb a greater share of costs.
“It’s great for us to be that big brother in the room when we can afford to,” said council member LaWana Mayfield. “The county needs to step up and handle more of their responsibilities.”
Council member Patsy Kinsey echoed her: “The county owes us.”
Charlotte might face a further shortfall in the coming years. The state legislature is considering plans to change how the state distributes sales tax revenue that could shift funds from urban areas to rural areas. Charlotte’s estimates show the city could lose up to $30 million, while state estimates show a considerably smaller annual loss, as low as $2.6 million.
Some council members were unhappy that Mecklenburg County informed them of the property tax reductions just before the height of budget season. Council member Greg Phipps said there should be a “post-mortem” to figure out what went wrong.
City Council will consider the budget with further hearings over the coming weeks, and vote on the budget in June.
Possible reductions and transfers
City staff presented options to close some – but not all – of Charlotte’s $21.7 million budget gap by reducing expenses and transferring funds. Here are some of the options:
▪ $1.9 million: Transferring expenses for arts facilities maintenance, such as Discovery Place, from the general fund to the city’s dedicated tourism fund. That would reduce the future funds available for tourism promotion.
▪ $2.7 million: Reducing the city’s departmental budgets. That would be done by eliminating frozen positions from 2009, and trimming budgets for travel and training, printing, telecommunications, and office and other supplies.
▪ Giving organizations such as the Arts & Science Council and the Charlotte Regional Partnership less money. For example, the city could save $117,633 by reducing the Arts & Science Council’s allocation 4 percent, to $2.8 million.
▪ $1 million to $1.5 million: Increasing certain fees so that the city recovers 100 percent of the cost for services. Such fees could include those charged to developers for rezoning petitions or major construction projects.