City Budget

Vijay's Budget Thoughts

On Tuesday, Asheville City Council plans to vote on next fiscal year's budget. The public needs to see the impact of how all the various pieces fit together not just for next year, but for the coming years.

I read municipal budgets for a living and it's a best practice for cities to publish five-year projections of operating revenues and expenditures when elected officials consider budgets. These projections are important because a one-year budget doesn't show the full impact of funding decisions - it only shows what the City expects to happen during that specific period. Because most City expenses are employee-related, because we expect those costs to happen each year (or recur), and because those costs tend to grow faster than tax revenues, we need to look out over a couple of years to truly understand Asheville's fiscal health. That budget projection, though, isn't in the City's budget document.

In a year where City Council is proposing a tax increase, where there has been a property revaluation, where there are proposals to add additional police officers, and where the City is about to embark on a significant voter-approved bond project, it's even more important to see how all of these pieces will combine to impact the City's budget not just for next year, but for the years after that as well. With expected expenses and revenues, will we need another tax increase next year? We don't know, but a budget projection could give us a good indication.

Making projections is never easy. There are a lot of assumptions and no one has a crystal ball. But my view is that it's much better to be informed about what might be headed our way, rather than to be surprised later. Those surprises are almost always unpleasant. With all that's going into next year's budget, the public needs to see the projection of how all these pieces fit together which is why I've made that request in person at the last two City Council meetings.

Vijay's May 9th Budget Comments

Asheville City Council is currently debating the budget for the next fiscal year (July 1, 2017 - June 30, 2018).  Vijay made the following comments at the City Council meeting on May 9, 2017.

“My name is Vijay Kapoor and I live in South Asheville.  I own a company that provides municipal budgeting and financial analysis to cities across the country and I’d like to comment on the proposed City budget.  I’ve reviewed this budget as if I were looking at it for one of the cities that I work with and this is the guidance that I would give them.

At the outset, you’re asking for a significant tax increase on City residents who will likely also see their county taxes raised.  That’s going to have a big impact on people who are on fixed incomes.  Before raising their taxes, you owe it to residents to make absolutely sure that the proposed spending is necessary and justified.  And there are three places in this budget where I have serious concerns.

First, this document doesn’t include the 5-year operating budget projection that is part of the City’s operating budget policy noted on page 10.  Before approving any budget, City Council and residents need that information to understand how this budget may impact future budgets and tax rates.  We can’t just view this year’s budget in isolation.

Second, there is not enough information in this budget about how the $25 million in bond proceeds for the Affordable Housing bond will be spent.  Before we borrow this money and start paying interest on it, we need to have a specific plan for its use and what’s on pages 106 and 149 of the budget is not sufficient at all for an expenditure of this size.  $25 million is more than what the City spends annually on our Parks & Rec. ($10.1m), Public Works ($9.5m), Transportation ($2.4m) and City Manager departments ($2.2m) combined.  I want to be clear that I don’t disagree with the goal or the intent of this bond, but from a budget perspective, this lack of information on specific projects is a red flag.  If we’re not ready to go out for this bond, then let’s wait until we have a detailed, transparent plan before taxpayers have to start paying interest on it.

Third, I want to caution you about immediately authorizing an additional 15 police officers. I work with many cities Asheville’s size and an increase of this many officers in one year is rare. I’m not opposed to hiring more police officers if there is a demonstrated need, but before we allocate additional money to do it and have to raise taxes to pay for it, taxpayers need to know what police department turnover is, whether there are unfilled vacancies, and whether there are other current police resources that the City could redeploy.  If we have a turnover problem, then we’ll be spending money to train people who walk right out the door.  Assuming that there is a demonstrated need to hire more police officers, I’d recommend phasing in the hiring over a couple of years rather than all at once to see whether it’s having any impact.

Budgeting is never an easy process and there are a lot of competing issues and priorities that are involved.  But regardless of the good intentions behind them, City Council owes it to taxpayers to make absolutely sure that the proposed spending is necessary and justified before it raises taxes.”