RALEIGH — City Manager Russell Allen gave a bleak preview of his coming budget, saying the city's 3,200 employees will likely get smaller raises and reduced benefits for another year as Raleigh emerges from the grip of the recession.
Allen pledged last week to avoid calling for a property tax increase, so he'll have to find other ways to plug a projected $8 million to $10 million shortfall.
Among the options: delay buying new vehicles; eliminate vacant positions in at least six departments, excluding police and firefighters; cutting merit pay increases; adjusting employee benefits.
Raleigh has imposed similar cuts over the past two years. The city eliminated 109 positions through attrition and reorganization, slashed merit pay raises from 5 percent to a 2 percent maximum, and avoided replacing 95 vehicles. "We're in a difficult spot," Mayor Charles Meeker said.
Allen foreshadowed the gloom last month when he canceled this year's Raleigh Wide Open, a downtown festival that would have cost the city about $180,000.
The tightening extends to the top. Allen did not get a base pay raise this year from his $220,000 salary.
Allen used charts to illustrate the predicament. Projections call for:
Property taxes to generate $187.6 million - a 0.7 percent increase from last year.
Sales taxes to generate $64.4 million - a 5.1 percent increase from last year. The city gets a share of sales tax revenue from the state.
Development-related fees to generate $2.9 million - a 3 percent increase from last year.
While revenues are up over last year, they still haven't rebounded to pre-recession levels, Allen noted. Sales tax revenue plunged 17 percent over 2009 and 2010.
"We are seeing some improvement and restoration," Allen said. "It's just very slow."
The city faces rising costs for employee benefits, including a $4.3 million increase in health and dental care, and a $980,000 increase in state retirement contributions.
Debt obligations add pressure. Allen proposes using $45 million in utility revenues toward the city's debt service - up from $39 million last year. In last year's budget, Raleigh plugged a $6 million to $8 million gap with a $5 vehicle registration fee and cuts to street, water and sewer maintenance.
The focus in lean times should be to protect police and firefighter jobs, Councilwoman Nancy McFarlane said, mentioning the recent tornadoes as a prime reason.
"Unfortunately, we got a real lesson in how valuable they are to us," she said.
Spending items outside the general fund budget could affect tax rates.
Raleigh voters will decide in October whether to approve bonds for $37 million in street improvements and $15 million for affordable housing.
For the first time, the city included sidewalks, bike lanes and greenways in a transportation bond referendum.
If voters OK the bonds, a homeowner would see an annual property tax increase of $15.80 on a home valued at $188,139, the median-priced assessment for Raleigh homes, city officials said.
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