CHAPEL HILL — The Town Council learned Saturday that the gap in next year’s budget could amount to at least a million dollars.
Town Manager Roger Stancil said during the council’s annual retreat Saturday that it’s getting harder to provide the community with even basic services without increasing property taxes.
“We can no longer assume that our resources are unlimited and will keep going up 5 or 10 percent a year in revenues without doing something significant,” he said.
Expected revenues for 2013-14 are falling $880,000 short of the town’s preliminary $52.5 million budget, Business Management Director Ken Pennoyer said. That figure is the same as the current budget and does not include major costs associated with the expanded library, solid waste changes, street paving or retiree health care. It also does not include next year’s transportation budget.
Chapel Hill Transit interim Director Brian Litchfield warned the Town Council last week that rising fuel and other costs, combined with expected state and federal funding cuts, will make for a tough budget environment.
Stancil said the council will have to rethink how the town operates. One staff suggestion for closing the gap is to use $2 million from the town’s fund balance.
Council member Gene Pease said the news is not a surprise.
“We knew this was coming. We knew a year ago it was coming. However we get through this process, the reality is we’re going to have to make some really hard decisions,” he said.
Council members are trying a new priority-based approach this year to planning the budget. In January, they ranked community priorities, and town staff used the results to draft a preliminary plan with more specific details. The council’s highest, or Tier 1, priorities comprise 70 percent of the budget, Pennoyer said.
Council members questioned the results Saturday.
Council member Sally Greene, who joined the board Jan. 28 and was not involved in the Jan. 9 decision, said few people would consider the library, which serves many valuable roles in the community, to be a lower priority. The plan identified it as one.
“The abstract nature of these goals creates maybe more problems than it solves,” she said. “It brings out the inner English major in me. These are really abstract goals in which ... you can slice and dice things many different ways.”
Pennoyer said a lower, or Tier 3, priority is not less important to the town, but it is less important relative to other priorities. Stancil said priority-based budgeting appears to provide “a much greater depth and breadth” at an earlier date. The results can be modified, he said.
“This is not a machine we’re building that’s going to spit out the budget, and then you sit back and say, oh no, where’d that budget come from,” Stancil said. “This is all information that will help me prepare a better recommended budget for your consideration.”
While property tax revenues could grow slightly and sales tax receipts are bouncing back to pre-recession levels, the council needs to keep in mind that the Orange County Board of Commissioners could consider a tax rate increase affecting town residents, Stancil said. One penny on the town’s property tax rate generates roughly $750,000, he said. One penny on the county tax rate raises about $1.5 million.