Chapel Hill Town Manager presents $156.2 million proposed budget for 2024-2025

GOVERNMENT

By Adam Powell
Correspondent

On the evening of Wednesday, May 15, Chapel Hill Town Manager Chris Blue presented his department’s proposed budget to the Chapel Hill Town Council at its regular business meeting.

Chapel Hill’s proposed 2024-2025 fiscal year budget of $156,259,106 is a 4 percent increase from the 2023-24 fiscal year, including a two-cent tax increase. The town’s General Fund constitutes approximately $89.4 million of the proposed 2024-25 fiscal year budget.

The proposed two-cent property tax increase would bring the tax responsibility on Chapel Hill property owners to a rate of 59.2 cents per 100 dollars of assessed value and is anticipated to generate an additional $2 million in annual revenue for Chapel Hill moving forward.

For a Chapel Hill homeowner living within the town’s municipal city limits with an assessed home value of approximately $500,000, their town property taxes will increase by around $100 per year.

Blue presented a slide that demonstrates how the two-cent property tax increase will be utilized.

Specifically, Chapel Hill’s Operations and Fleet Departments are scheduled to receive $500,000 each from the additional funds, while the town’s Facilities and Streets Departments each will receive $250,000. The Town’s Transit Operations Department will receive an additional $488,000, for a total of around $1.98 million.

“In last year’s budget, we made significant progress in staffing and creating several new positions across the organization to advance shared goals,” Blue explained to council members. “And this year, we’re looking to make continued progress in the areas of core operations facilities, streets and fleet.”

In its adopted 2023-24 fiscal year budget, Chapel Hill approved $84.8 million in revenues for its General Fund. However, this year’s General Fund revenues are estimated to be a little higher, around $85.6 million, according to the town manager. This was due in part to increased sales taxes, state-shared revenues, and grants.

The town also appropriated slightly less in its fund balance (approximately $2.3 million) than the $2.46 million town leaders projected for fund balance expenditures last spring.

The budget includes a 6 percent market cost of living adjustment for Chapel Hill’s employees, which Blue has suggested for months is crucial for Chapel Hill to retain and recruit top talent for its various departments.

“Our people are always our number one priority,” Blue said. “Our excellent team members are the way we get everything done. From our core services to our big projects to advancing your [the council’s] goals with this budget, we continue to show them that we value those employees who make this organization run every day.”

Blue added that Chapel Hill’s projected 2024-25 budget will dedicate close to $3 million for affordable housing efforts, many of which are done in conjunction with the town’s various community partners. Numerous projects are either in construction or will begin construction later this year.

The town manager is proposing a half-cent increase for Chapel Hill’s enterprise fund, which includes the town’s transit services such as buses, along with parking facilities and enforcement. UNC-Chapel Hill and the Town of Carrboro are proposing proportional increases in their own right as part of their partnership with Chapel Hill in local bus and transit services.

The half-cent property tax increase would mark a 14 percent increase in the transit department’s annual budget. With no new federal monies coming this year following several years of assistance from Washington, D.C., the town appropriated approximately $1.29 million from its fund balance for this coming fiscal year for the transit fund to assist with Chapel Hill Transit and other local transportation needs.

While the transit fund is looking at a double-digit increase year-over-year, Chapel Hill’s parking fund is set to have a 9 percent decrease from last year’s budget. The primary reason for the decrease is a smaller transfer from the town’s debt fund as the Rosemary Parking deck opens and begins generating revenues, eventually paying off the facility’s outstanding debt.

“Once the East Rosemary Street parking deck opens – it will be real soon – the revenues generated should be sufficient to cover future [debt service] payments,” Blue explained.

Chapel Hill is not proposing an increase in stormwater fees in this proposed budget, although public housing is set to receive a boost of approximately 4.3 percent in the form of Housing and Urban Development (HUD) contributions, along with increased rental revenues that the town has experienced over the past several months.

“Our housing fund is up due to an increase in rent revenues, which have helped offset increased personnel costs. Good news there,” the town manager said.

Blue indicated that this year’s budget is set up strategically to be something of a bridge year to the 2025-26 fiscal year budget, when the town anticipates higher revenues due to a new local property evaluation throughout Chapel Hill.

With soaring home prices throughout the region over the past half-decade, the town anticipates several million in additional revenues through the revaluation process in 2025.

“This budget continues funding the priorities in the five year budget strategy and supports the complete community framework that addresses the increased cost to carry out the services provided by [Chapel HIll’s] transit [fund],” Blue said. “And it bridges the gap to next year’s revaluation, where we propose to use the expected tax growth to right-size our budget.”

Greater Chapel Hill-Carrboro Chamber of Commerce Chair Aaron Nelson came before the council to describe how a property tax increase such as the one being proposed would impact local residents.

“The bottom line is that the impact on businesses is inconsistent. It sort of depends,” Nelson said. “First, it depends on the type of enterprise. No surprise when you have modest, infrequent increases, and it’s a pretty stable valuation – the Top of the Hill building has been worth the same for a decade. It’s been assessed at the same value. That modest impact is modest in both businesses.”

“But larger and more frequent increases, particularly when revaluations go up, the impact is significant,” Nelson continued.

Nelson provided specific details about various local businesses, including Top of the Hill and Siena Hotel, breaking down their various rents and current property tax obligations and how the newly proposed tax increases would affect them. He indicated that vacancies across numerous local businesses affect property values and will affect evaluations in 2025 and beyond.

“This impact of vacancy – there’s a 40,000 square foot building downtown that is assessed at $7.5 million,” Nelson said. “It pays you $123,000 property tax (annually). If it was fully leased, it would be worth more – the tax assessor (says) it’s worth more, if you need a cap rate of six and a quarter percent, it would be worth $13 million. And that’s how you would assess it.”

“You’d get more money if it was full,” Nelson continued. “But instead, because it’s empty, [the property owner] is gonna go to the tax assessor and ask for a reduction, which he has the right to. It’s not worth $7 million empty. We wouldn’t buy it for that. And so instead, likely, you’re gonna lose $80,000 delta [in property taxes] on a single building based on whether it’s full or empty.”

Chapel Hill’s Town Council will vote on the 2024-25 fiscal year budget at its June 5 meeting.


Adam Powell is a reporter on local news and sports and an education communications professional. A 2001 graduate of UNC-Chapel Hill, Powell has served as managing editor of multiple local publications, including the Mebane Enterprise, News of Orange County and TarHeelIllustrated.com. The public information officer for Rockingham County Schools in Eden, N.C., Powell is the author of four books and lives in Mebane with his wife and two children.
This reporter can be reached at Info@TheLocal Reporter.press

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