Durham budget holds line on city property taxes. So why won’t everyone be happy?
AI-generated summary reviewed by our newsroom.
- Durham saw a revenue drop after over 10,000 property tax appeals.
- City Manager Bo Ferguson suggests no property tax increase, but raises utility costs.
- Durham City Council will hold a public hearing on budget on June 1.
Durham’s proposed budget holds property taxes flat but raises utility rates and limits city employee pay to counter a rare drop in tax revenue.
Monday night, City Manager Bo Ferguson recommended a $766.1 million budget for Fiscal Year 2026-27, calling the city’s current financial situation “unprecedented.” For the first time in years, Durham will have less property tax revenue than last year, he said.
“No city of Durham administration in recent memory ... has ever built a budget under these circumstances,” he said, attributing the decline to an “unusually” large number of property tax appeals after last year’s revaluation.
“Once this budget adjustment is behind us,” he added, “we are also navigating inflation, rising fuel and operating costs and increasing demand from a growing center.”
Revenue drop driven by tax appeals
Ferguson said property tax appeals, particularly those from large commercial properties, resulted in refunds that reduced both current and future revenues in Durham.
Last year, all property owners saw changes in their tax values due to the countywide revaluation. The process occurs every four years when the Durham County Tax Administration assesses the market value of all real estate to ensure taxes remain fair. However, due to city and market growth, thousands of property owners saw spikes in their values, which led to higher tax bills.
Over 10,000 property owners appealed their revaluation and got a refund.
“Many appeals were granted,” Ferguson said. “The overall assessed tax base has been reduced by about $2.6 billion, requiring the city to issue refunds totalling roughly $5 million in the general fund and $9 million across all funds ... It is important to underscore that this is a one-time correction related to the unique timing and nature of these appeals. We expect revenue growth to return in future years as these corrections work their way through the system.”
No property tax increase
The City Council wanted to avoid a property tax increase during a time of financial strain for residents. Ferguson said the budget maintained the current tax rate of 43.71 cents per $100 of assessed property value, calling this a “significant accomplishment.”
For a median home value of about $424,000 in Durham, the annual city tax bill will remain about $1,853.
Homeowners will also pay a county-wide tax. Durham County Manager Claudia Hager has recommended a 2-cent property tax rate increase to 57.42 cents per $100 of assessed value to fund areas across the county, such as public schools and emergency services.
The owner of the $424,000 home in Durham could pay $4,287 in both city and county property taxes combined. To get this number, you take the home value, divide it by 100 and multiply it by the added proposed city and county rates (424,000/100 x 1.0113).
Increase in utilities and fees
While property taxes are holding steady, other costs are rising in Ferguson’s recommended budget.
- Water and sewer: Rates will increase by 12% for customers to cover rising operating, capital and regulatory costs, including improvements to address PFAS “forever chemicals.”
- Fees: Adjustments are proposed for certain parks, recreation rentals and programs.
- Stormwater and parking rates will remain the same.
No merit pay increases
Ferguson’s budget includes investments and trade-offs to the city’s workforce and services.
Regarding employee pay, the budget fully funds the Durham livable wage, which will increase 14% to $25.09 per hour. All city employees will get a 2% raise.
However, merit-based “pay for performance” and step increases are not funded this year due to the revenue loss from tax appeals, Ferguson said.
“Despite that disappointing news, we are funding a new classification and compensation study next year to ensure our pay structure remains sustainable and in line with the market,” he said. “While merit increases could not be funded this year, the market study will help us ensure our employees remain paid commensurate with their market value.”
Public safety and transit
Ferguson’s budget calls for 16 new Fire Department positions to staff Ladder Company Eight and funding for firefighter cancer screenings. There is money for improvements to station security, equipment, and furnishings, as well as increased overtime.
The GoDurham bus service will remain fare-free another year, supported by an $8.2 million one-time contribution from the Durham County Transit Plan. Ferguson said long-term sustainability for free buses will require “serious discussions” among funding partners.
The budget also proposes closing Forest Hills Pool, which will not open this summer, and the pause of the installation of new speed humps around the city.
Next steps
Mayor Leo Williams acknowledged the difficulty of Ferguson’s budget proposal, saying, “not everybody is going to be happy.”
“Actually, no one is going to be fully happy with this budget,” he said. “There are trade-offs ... We have a lot of work to do, and we are dealt an impossible deck of cards here.”
The City Council will hold work sessions on the budget on May 27 and 28, with a formal public hearing scheduled for June 1 at 7 p.m.