CHAPEL HILL — The town of Chapel Hill faces a budget gap estimated at $5.2 million for the fiscal year that begins July 1.
Lower investment returns, higher debt costs, and declines in development fees and sales tax are all contributing to the gap. At a retreat Saturday, town staff members said the recession will continue through 2009, with a slow recovery possible in 2010.
The projected gap represents 10 cents on the town property tax rate, because each penny per $100 valuation generates about $500,000 in revenue. The town will try to make up the gap by:
* Delaying new debt. The Chapel Hill Public Library expansion, for example, will likely be pushed back to 2010 ($1 million savings).
* Freezing employee salaries ($1 million savings).
* Saving budgeted money. Departments will hold back part of their budgets this year and next. Much of the savings will come from leaving vacant positions unfilled or filling them more slowly ($2 million savings).
* Withdrawing from the fund balance, a reserve used to manage cash flow through the year. The town will remain within recommended guidelines ($1 million savings).
* Deferring capital projects.($200,000 savings).
Orange County revalued property this year, with the average assessed value of homes in Chapel Hill and Carrboro rising 29 percent. Town Manager Roger Stancil plans to recommend a revenue-neutral tax rate. That would mean lowering the town's tax rate to generate the same tax revenue as last year and keep tax bills level for homeowners whose property assessed at the average rate.
Mayor Kevin Foy said he can't see anything else.
"I can't envision supporting a budget that includes a tax increase this year," he said.
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