City Council - Regular Meeting

Okay, good afternoon, good evening, everyone. Welcome to the especially called Asheville City Council meeting. This is July 15th, 2026. And we have a pretty short agenda today. So I'm going to just turn it over to Brad Branham, our city attorney, and let you begin with the presentation. Actually, I don't know what order you and Tony are working in, but Tony McDowell will hear from, or maybe also Lindsay Spangler.

Thank you, Mayor. And good evening, everyone. Good evening, members of council. Good evening to the public. You are correct, Mayor. I will be joined this evening as part of this presentation by Tony McDowell and or Lindsey Spangler from the city's finance department. We're going to outline to Council a proposal from staff this evening to make an adjustment to your already adopted budget, specifically involving the tax rates therein. But before we get to that point, I'm going to begin tonight's presentation by taking you through a few very important points. I want to highlight the issue that's currently facing the city, which is what brings us here tonight. I want to talk to you about the legislation recently adopted by the state of North Carolina, which brought us to this point. And finally, I want to talk about what that means for the city of Asheville for your budget and provide you with a proposed tool that you can now use to address that. But let's start from the beginning and outline what the issue is that brings you here tonight. As council knows on June 9th, the city council approved a balanced budget as you are required to do by law. Now that budget included as part of your calculation of revenue. the use of 2026 property tax values. Those values were the product of Buncombe County's 2026 reevaluation process. After council adopted this budget, the North Carolina General Assembly took action to adopt into law two separate bills. The result of those bills requires Buncombe County and the local governments therein now to use the 2025 property tax values instead of the tax values from 2026, which is what you had previously used in your budget. Now, I use the term 2025 values. I think it's important to note for this conversation that most of those values actually came as a result of the county's last property reevaluation that took place way back in 2021. As a result of all of this, the city's budget is no longer balanced, and unfortunately that means we are, for the moment, legally noncompliant. Now, how do we get to this point? As I said, the state recently adopted two new laws. These are Session Law 2026-8 and 2026-47. The first of those two bills, which is formally known as Senate Bill 889, is probably the most important one for us here tonight. It was ratified into law on June 19th of this year. And what it did is it required several counties around the state to hold off one year on using new 2026 property values. Instead, it mandates that you use those 2025 property tax values. Now, as I said, again, our property tax values, even though we use them in 2025, date all the way back for the most part to 2021. The second bill, which was formerly Senate Bill 474, was ratified on July 8th. This created a limited exception to that first bill, 889, that applied to certain counties to allow them to exempt themselves or be exempted automatically from that mandate to use last year's tax rates. The exception that applied for Buncombe County was this. the county had the option to continue to use 2026 values as part of its budget process, but only if the county also adopted a revenue neutral tax rate. Now, for the very same reasons that I've mentioned that we go all the way back to 2021 for last year's tax values, it's important to understand what that meant for the county. That would have meant a considerable revenue disparity if they were to adopt a revenue neutral rate based upon the budget that they prepared. So as many of you also know, Last night the county met and they took a vote from the County Commission to not exercise this exception that was provided for in Senate Bill 474. Now I want to take a moment and state very clearly that that exception in that statute to use 2026 values you adopt a revenue neutral tax rate was only given to the county the city was not given that option no other municipality in the county was given that option so what the county's decision does is it imposes the obligation to use last year's tax values in the county's budget but also for all of the municipalities in buncombe county including the city of asheville Along with that vote, the county also voted to adjust its tax rate in order to deal with that discrepancy. They have the same obligation to have a balanced budget that you do. So they utilized a very thinly developed but applicable legislative tool to come in after July 1st and balance a budget, again, using this tax rate adjustment process that I'll talk to you more about in just a second. All right, what does this mean for the city of Asheville and your budget? Well, because of the state legislation that I've talked about and the decision last night by Buncombe County, The City of Asheville's 2026-27 fiscal year budget is now, number one, mandated to use the tax values from last year instead of the new values. The values that you used in your budget now must wait until next year before they can be used as part of budgeting process. In addition to that, That then creates the same revenue disparity, not the exact number, but the same revenue disparity issue that Buncombe County faced in its budget last night. We know those tax values that you are now required to use are far, far lower. So when you plug those into the formula based upon the tax rate you adopted, The amount of revenue it is expected to generate is significantly lower. Now, in order to comply with state law, the city must now take action to rebalance its budget, as the county had to do last evening. And as I mentioned, the county utilized a very limited but available exception that's provided by statute to you to be able to, after July 1st, to readjust your tax rate. You can only utilize this tool in two circumstances. Number one, if you end up after July 1st having more revenues, substantially more revenues than expected, or if you end up with substantially less revenue than expected. Now I think I've highlighted this a couple times, but it's worth saying once again, that because you are now mandated to use old tax values, tax values that really for the most part originated about five years ago, those values, when multiplied by the tax rate you adopted, are going to result in substantially lower revenues from tax proceeds. Because of that, you have the same right that the county had, the ability to utilize what can be found in North Carolina General Statute 159-15, It was also reiterated in the second of the two bills I mentioned earlier, which would allow this council, just as the county took action last night, to go in and adjust your tax rate as part of a budget amendment in order to rebalance the budget. And again, that is because in this particular very unique circumstance, you're going to end up with substantially less revenue than you had originally planned. Now, counsel, in order to actually go over what those numbers look like, to formulate further the proposal that staff's making to you, I'm going to hand this over to our more than capable finance experts, but I want to ask if you have any questions for me before I hand it to them.

Okay.

I'm going to continue to be available for you for additional questions, but with that, I'll ask Tony to come up.

Good evening, Mayor, City Council, Tony McDowell, Finance Director, and thank you, Mr. Branham, for that introduction. So I'm going to talk to you all about the specific property tax implications of the legislation that Mr. Branham explained and also the action that council, or that the county commissioners took last night. So as a reminder, as Mr. Branham indicated, on June 9th, City Council adopted a balanced budget of $275.7 million, and that is for fiscal year 26-27. And just a reminder, that is the fiscal year that began on July 1, so we are already about two weeks into that fiscal year. And normally, that June adoption would have wrapped up the process for us. As a reminder, that tax rate that was adopted On June 9th was 37.69 cents. That tax rate allowed the city to have a structurally balanced budget when applied to the property values from the county's 2026 reappraisal. And I think that's the key. And as Mr. Branham indicated, those values are not the ones that the county has chosen to use. So we're going to be asking you all tonight to adjust that tax rate to bring in the same amount of property tax revenue that that 37.69 cent tax rate was going to bring in. So just quickly as a reminder, it was a lengthy budget process that we went through with you all this year. It was a difficult budget process. We had to make a number of reductions to get us to that balanced budget in June. The process started in January. We had a number of work sessions with city council where we walked through the budget. We also had two public comment opportunities for the community, both in February and in May after the proposed budget was presented. And as I mentioned, we wrapped up that process in June with the adoption of the structurally balanced budget. So what's changed since then? So as Mr. Branham indicated, there's been legislation at the state level that was approved. The county took action last night in accordance with that legislation. to go back to the property values from 2025. And so with that decision by the county to utilize property values from 2025, the tax rate needed to maintain a fiscally sound and structurally balanced general fund budget is now 50.78 cents per $100 of assessed valuation. And then there in bold and italicized, we want to emphasize that this rate adjustment from the 37.69 up to the 50.78 represents a net zero impact to the overall city budget and our overall city property tax collections, which council approved on June 9th. And I'm going to show you all that on the next slide. So the top chart here shows the adopted property tax revenue calculation based off the reevaluation numbers, those 2026 values. The city's tax base after reevaluation was about $28.4 billion. We applied that $37.69 tax rate increase or tax rate along with the collection rate, and we had $106 million in property tax revenue that was included in the budget that you all adopted on June 9th. So with the adjustments that the county made last night to go back to the 2025 values, the city's overall tax base is reduced from 28.4 billion down to 20.8 billion. And again, to maintain that same amount of revenue of 106 million in our budget, that requires a tax rate of 50.78 cents. We did just want to point out down there at the bottom that if the rate was not adjusted and stayed at 37.69 cents applied against that lower tax base, that would result in about a $28 million revenue reduction to our overall budget. And then we wanted to just provide one quick example. And we used some numbers during the budget process where we looked at the impacts to a median priced home in the city. And so we wanted to show you all what the impacts of the decision that we're, the motion that we're gonna be asking you all to consider tonight related to the tax rate. So under the adopted budget, the median home value that the county provided us with was about $478,500. they would have paid that 37.69 cent tax rate, which would have resulted in a city tax bill of just over $1,800 a year. So going back to the 2025 values, this amended tax rate that we're asking you all to consider, in this particular example that we've chosen, a home that would go back to a value of $350,000, if you apply that 50.78 cent tax rate to that home value, They're going to pay actually just a slightly lower amount than they would have paid under the original tax rate. And again, this is very much a hypothetical situation. Actual tax bills and the impact per taxpayers are going to vary based on what their home values were both before and after reevaluation. And then just quickly switching gears, as you all know, when you adopt the budget every year, at least the last three years, you've included a property tax rate for the bid fund as well. On June 9th, that property tax rate that you all approved was 7.63 cents. And again, that was based on the reappraisal numbers. Going back to the 2025 values, we're recommending that you all adopt bid tax rate of 8.77 cents, which was the tax rate in the bid fund prior to the reappraisal. And then finally, in summary, in order to maintain a balanced budget, council must adjust the tax rate to ensure that the city has enough revenues to cover the spending that was approved in the adopted budget back in June. As I indicated on one of the earlier slides, the actual impact to individual taxpayers is going to vary based on the home values and how much they change between 2025 and 2026. And just a reminder that overall the decision or the recommendation that we have for you all tonight would have no impact, zero net impact on the city's property tax collections. We would collect the same $106 million as we would have collected under the previous tax rate. So with that, we have a recommended motion on this slide. Happy to take any questions from council that you may have at this time.

next year, so the values will hold for next year, and then we will do what with the community? Re-evaluate a neutral rate and all these things again?

Yeah, so I think, I think the plan that I heard the county articulate last night is they will, they'll have, there'll be a revaluation that will presumably occur as a part of next year's budget process. There will likely be some update to those 2026 numbers that they used this year. I don't know exactly what that'll look like, but we will certainly, as we start our budget process this year, we will stay in contact with them.

Okay, so maybe I misunderstood. They'll do a new re-evaluation. I thought they were just using... No, no, no.

They're not going to do a new re-evaluation, but they will potentially look at some of the values. So if there's been a change, for example, if someone has done a permit.

Okay, just typical things. Otherwise, those values.

Yeah, sorry for the confusion there.

Well... So big asterisk to all of that is whatever in the world the legislature decides to do between now and the next fiscal season for all the local governments. I mean, we didn't know this was happening this year. So I think we don't really know what to anticipate because we have a referendum on the ballot in North Carolina that would allow the legislature to It's a constitutional amendment that would allow the legislature to cap property taxes for all cities and counties if they wanted to. In fact, I don't think they actually need a constitutional amendment to be able to do that. So it may be somewhat performative, but even with that, I think we need to be very mindful that we could be seeing some legislation that confines how we manage our budget next year. and it may address the revalve. Of course, there'll be a whole crop of new counties next year that'll be in a cycle of revaluation, so.

Yeah. Thank you, Tony.

Thank you.

And thank you, Brad.

Okay, we... We have a recommendation and a motion here. We don't have anyone signed up to speak, but this would be the, unless that changed since I last looked. No, we don't have anyone signed up to speak under this.

Just a little clarifying point. As I did not support the budget, I won't be supporting tonight, but in general, this concept, I understand and don't have a choice but to support it.

This is Kim on speaker phone. Can I make a statement? I didn't know she was even here.

Yes, and I should have said, I apologize. Councilman Roney is here on speaker phone. Yes, Councilman Roney, please proceed. Hello.

So I'm sorry that I can't be there in person in the meeting, but I appreciate the opportunity to call in, and I realize that means that I cannot vote. But for the record, I would be in the same position as the previous budget vote. appreciating city staff hard work getting us to this point and navigating the overreach of the state legislature. I find that I still am in the same position regarding our resources and especially wage and compensation. So I would still be in a position of a no vote if I was able to participate.

Mayor, I'd like to add some words to the record, please.

Please.

First, thank you so much to RF Finance staff, Tony, Lindsey, everyone in your department. You guys navigated a very tough budget year. and then have it go back and do it all again. So thank you. Thank you, Brad and DK, for the many phone calls and keeping up with the legislation and keeping us all up to date and kind of echoing Council Member Roney's I just want to take a moment to express my frustration at the actions targeting Asheville and Buncombe County from the NCGA. We are back here discussing this budget after what was already an open and transparent legal budget process. And during that time, the city of Asheville did fulfill its responsibility. Our staff spent months preparing this budget. Council held public meetings and we listened to residents. We debated priorities and adopted a balanced budget based on the law. Then after that process was complete, the NCGA changed those rules. And as a result of SB 889 and SB 474, we are now forced to revisit a budget that was already complete. And that's a little ironic considering that this same legislature has struggled to deliver a state budget on time and is now making a local government start over on ours. I believe that local communities are best equipped to make local decisions and This hurts, particularly because we are still recovering from Tropical Storm Helene. And communities are still rebuilding after this historic disaster. You know, Asheville, in the time that I've been here, in the time that I've seen, has never asked Raleigh to solve our problems, but we certainly have not asked Raleigh to create new problems and challenges for us, especially in the wake of this storm. So I will be a yes, because I was a yes in the previous budget, because I think it supports our workers, it supports our firefighters, it supports our police officers, it invests in critical infrastructure, it also maintains city services, and I believe those are all things that Asheville expects their city to deliver. Thank you, staff, and thank you to my colleagues.

I'll make a motion.

I'll make a motion, yeah. Make a motion to amend section four of the fiscal year 2026-27 adopted budget ordinance to reflect a property tax rate of 50.78 cents per $100 of assessed valuation of taxable property. and to amend section five of the fiscal year 2026-27 adopted budget ordinance to reflect a property tax rate of 8.77 cents per $100 of assessed valuation of taxable property within the downtown Asheville Business Improvement District.

Okay, we have a motion. Do we have a second? Second. All right, we have a second. Okay, and I'm just adding to that. I think that whenever you go through revaluation, it can be really confusing. Just the process alone is very, very confusing. Everybody gets their letter telling them what their new value is, and we get a lot of emails at that time saying, you've raised our taxes, but of course, no one's raised any taxes. It's just the process the county goes through of doing the revaluation of property. But again, we had gone an extra year because of Helene. So it was five years instead of four. And now even after everyone's been notified of their value, as you pointed out, though, we're going to be we sort of are doing a do over here. And fortunately, this is at least happening before property tax bills have gone out. So what folks are going to see is the value from last year, actually, whatever value they had going all the way back to 2021, unless they had made improvements to their property, with just a new tax rate. So I think this really adds a lot to the confusion in the process and creates distrust. And that is really, really unfortunate. The other thing I want to clarify is I was listening to the news this morning about what the county did last night. And one of the reporters said something like the county property taxes increased 40 percent or something like that. And what they were doing is they were taking the tax rate that was already passed for the 2026 year. And they were comparing that to the new tax rate. But of course, that's apples and oranges because the old tax rate was based on the revaluation. So when you look at this situation, what people are going to receive is a tax bill. And what they'd be comparing it to is last year's tax bill where their value was higher. the same, their tax rate will have changed. So I just wanna clarify that because I think that reporting was pretty shocking if someone was just happened to be listening to the news this morning and very inaccurate. So just to clarify that point. We're gonna do our best to continue to try to communicate with clarity and transparency to the community and handle all these maneuvers that the legislature threw at us at the last minute. But as a community, we gotta bring everyone along in that understanding. So we have a motion and a second. All those in favor, please say aye. Aye. Any opposed? No. Okay, so all those in favor, raise your hand. There are four people raising their hand. All those opposed, raise your hand. There are two opposing. Okay, thank you. That concludes our agenda. I'm looking at the manager, right? We don't have any general public comment. We don't have anyone signed up to speak anyway. So I will adjourn the meeting. Oh, I'm sorry. We're not adjourned. I unadjourned the meeting. We need a closed session motion. Please, Councilman.

Thank you, Mayor. I move that the Asheville City Council go into closed session for the following reasons. One, to prevent disclosure of information that is privileged and confidential pursuant to the laws of North Carolina were not considered a public record within the meaning of chapter 132 of the general statutes. The statutory authorization is contained in North Carolina general statute chapters 143-318.11a1. The law that makes the information privileged and confidential is North Carolina general statute chapters 143-318.11a1. And two, to consider the qualifications, competence, performance, character, fitness, conditions of appointment or conditions of initial employment of an individual public officer or employee or prospective public officer or employee. The statutory authorization is contained in North Carolina General Statute Chapters 143-318.11 .

All right, we have a motion. Do we have a second? Second. All right, we have a motion and a second. All those in favor, please say aye. Aye. Any opposed? All right, we'll adjourn from the closed session.