Chapel Hill recommended budget includes 5-cent tax increase

GOVERNMENT

By Adam Powell
Correspondent

CHAPEL HILL — Chapel Hill town staff are proposing a tax increase in line with budget discussions earlier this year as the town tries to catch up on expenses.

Interim Town Manager Chris Blue presented a proposed 2023-24 budget that would include a recommended increase of 5 cents to the town’s current property tax rate. The total proposed budget is $143,696,978, marking an 11% year-over-year increase. If approved, the new Chapel Hill tax rate would be 57.2 cents per $100 of assessed home value for the town’s homeowners and commercial property owners.

The recommended budget includes using $2.5 million in fund balance, which is a marked decrease from the nearly $4.7 in appropriated from fund balance in the previous fiscal year. The town adopted more than $2.6 million in appropriated fund balance in last year’s budget, but had to come up with an additional $2 million as the fiscal year went on in order to meet service requirements.

“Without additional revenues, we simply cannot keep pace with our basic services,” read Blue’s formal statement to the council and mayor Pam Hemminger. “For too many years, we have maintained funding levels while costs have risen, and we are unable to continue operating this way. It is time to acknowledge that, in order to address the significant backlog of unaddressed needs, we need this increase.”

“What I am recommending this year is not excessive. It only begins to address some of our needs, and we appreciate the Council’s ongoing commitment to implementing a 5-year budget strategy to meet those long-term needs,” Blue continued.

If approved at the recommended levels, property tax revenues around Chapel Hill would increase from approximately $35.8 million in 2022-23 to just over $41.1 million in 2023-24.

Broken down in more precise numbers, a homeowner in Chapel Hill with a home assessed at $500,000 can expect an annual tax increase of approximately $250 per year. Homeowners with homes priced around $250,000 can expect an annual tax increase of around $125. The increase, and the subsequent $5 million in additional revenue, would fund $971,000 in parks capital, $500,000 for greenways around Chapel Hill, $750,000 for the town’s fleet of vehicles, $282,605 for affordable housing, and $1,85 million for additional staffing, among other funding items. It also includes a 5% cost of living pay increase for town staff.

The council discussed the best route to build its funding in March well beyond the coming fiscal year. The Blue presented example scenarios at the time that would allow the council to take a more or less aggressive approach. The more conservative option was a tax increase of four cents, followed by 1.5-cent increases for the four years following to “catch up” or a more aggressive approach that would raise taxes by 7.5 cents this coming fiscal year and a series of decreasing tax hikes over the next few years.

The budget presented on Wednesday falls between the two scenarios for this year. The council is required to adopt a budget each year and can not preemptively approve future budgets. A public hearing is required before formal adoption of Blues recommendation.