City Budget Worksession Studies Revenue Stream

By Leslee Kulba- The City of Asheville convened a budget work session to discuss revenue streams. Citizens could only brace themselves for the next round of lessons in, “Build it and they will come” that continue to be an exercise in “Waiting for Godot.”

Julie Mayfield, Asheville City Council




Surely, somebody would have an epiphany about a magic money tree, like the federal government, whose dollars sent to repair broken windows multiply like no others. Swept under the rug would be those taxpayers, who like captive turnips, could be squeezed forever more.

It didn’t happen that way at all.
In spite of ample opportunity to launch into one of these themes, Cathy Ball, whose term as interim city manager is about to come to an end, instead presented what was probably the most considerate analysis of supply-side realities heard in well over a decade within the council chambers.

Ball began with an overview of the city’s revenues and expenditures. Applying anticipated growth to the city’s budget of around $124 million, revenues would exceed expenditures by $400,000; but Ball said that was not enough to meet community expectations. For example, even with millions in bond revenues, the city can afford only to resurface streets every forty years. Deferred maintenance has sunk Asheville’s Pavement Condition Index to 58.7/100.

Councilor Vijay Kapoor had asked what options council had for raising revenue. There are very few taxes and fees the North Carolina General Assembly allows local governments to charge without a special lobbying campaign. This time, it was Councilor Julie Mayfield who spoke in thinly-veiled code of an uncooperative (Republican) legislature.

The traditional method of increasing city revenue would be to raise property taxes, but that failed the city’s equity-lens test. Higher taxes downtown just trickle down to renters, employees, and consumers, and thus turn out to be regressive. A Business Improvement District, or a special assessment for a specific project in any other part of town, Ball said, wouldn’t raise much revenue. She said the same held true for all but three options.
Staff did not want to touch a hotel tax, Ball explaining tourism defines the local economy. Tourist spending accounts for $2 billion in spending downtown each year and 18,000 jobs. On top of additional sales taxes collected, the city has received $22 million for capital projects from hotel taxes since the Tourism Product Development Fund was established. Ball recommended instead of raising hotel taxes, sitting down with the Tourism Development Authority to craft a plan for floating $50 million in bonds.

A second option would be levying a transit tax. The state allows counties to hold a referendum on a quarter-cent sales tax, provided all revenues generated therefrom be applied to the improvement of existing countywide transit projects. If approved, the city could collect an extra $12 million a year, but they are at the mercy of the county commissioners for approval.

The third option would be to charge a prepared food and beverage tax, or meal tax. As an argument against this tax, Ball said members of the Asheville Independent Restaurant Association contributed $2.14 million to charities last year, and they currently employ 5,800 with an average tipped hourly wage of $19.46. She had no idea what all the other restaurants that are not AIR members were contributing. Ball said a burden added to restaurateurs would trickle down and likely offset some of the good they’re already doing. Restaurateurs consulted preparatory to the meeting said they might support the tax if it could make downtown streets cleaner and safer.

Mayfield asked if the General Assembly might be open to a tax exclusively on beverages, as opposed to a prepared food and beverage tax. Rather than the Pigouvian tax imposed in Berkeley to fight the obesity crisis, this tax would apply only to alcoholic beverages. Mayfield asked Ball to estimate how high a beverage tax would have to be to garner as much revenue as the proposed 1% meals tax. Councilor Keith Young thought the concept was worth staff analysis, too.

Peering through the city’s equity lens, council wouldn’t deem the tax regressive because alcoholic beverages are not considered a staple in jurisdictions where local leadership is not driving citizens to drink. In terms of getting visitors to pay a greater share of taxes, the city’s burgeoning beer tourism industry would account for a good portion of revenues collected. And, as far as achieving tax equity by getting consumers to pay more for the services they consume, the outgoing police chief, Tammy Hooper, recently shared beer tourism was resulting in increased traffic accident calls for service.

Even so, something was missing. Council was again searching for the illusive formula for more perfectly slicing the proverbial pie instead of considering ways to make it easier for all the disheartened makers in the community to bake more and more amazing pies.

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