Chapel Hill Town Manager presents recommended 2025-26 budget

GOVERNMENT

By Adam Powell
Correspondent

CHAPEL HILL–On the evening of Wednesday, May 7, Chapel Hill Interim Town Manager Mary Jane Nirdlinger presented her recommended 2025-26 fiscal year (FY) budget to the Town Council. The budget included a total recommended combined property tax rate of 50 cents per $100 of assessed property value and a $ 5.5-cent tax rate for the Downtown Service District.

“The recommended budget for 2025-26 recognizes the council’s most important goals and invests in strategic initiatives to achieve those objectives, even during these challenging and unprecedented times,” said Nirdlinger in the introduction to her formal presentation. “We look forward to working with council to continue offering the core services our residents expect.”

Total recommended budget just under $164 million, $95 million for general fund

The recommended budget presented by Nirdlinger is just under $164 million for all funds, with the town’s general fund comprising approximately $94.9 million of the total budget. That marks a 4% increase from Chapel Hill’s FY 2024-25 budget. Nirdlinger and her staff are proposing a tax rate of 5.8 cents above Chapel Hill’s revenue-neutral tax rate of 44.2 cents per 100 of assessed local property value. Still, they would cut the town’s property tax rate from its previous rate of 59.2 cents to 50 cents. This reduction is possible because of the significant increases in Chapel Hill’s property values through the recent revaluation undertaken by Orange County.

“This year’s property tax revaluation reflects significant growth in values for both residential and commercial properties,” explained Nirdlinger in the budget presentation materials. “We are also facing challenges related to low sales tax revenues, inflation, uncertainty about federal actions, and our limited sources of revenue, primarily property taxes.”

“By continuing to stabilize our financial base and strengthen our organization, we will be stronger and more resilient during this time,” the town manager said. “We continue to need to invest in maintaining our buildings and facilities, streets, and fleet to support the services the community values, as well as supporting the ongoing operations of the town, as outlined in the five-year outlook.”

Of the 5.8 cents the town is declaring it needs above and beyond the current revenue-neutral tax rate, 5.5 cents would fund the third year of Chapel Hill’s five-year outlook, addressing critical needs while accounting for declining sales tax revenues and lessening Chapel Hill’s reliance on its existing fund balance. The remaining 0.3 cents of additional funds would provide funding for capital and increased cost of operations for the town’s Transit Fund. The budget also calls for a 5% pay increase for town employees.

“We recognize that a higher tax bill impacts our property owners, and we also acknowledge that we must have sufficient revenues to carry out the town’s vision,” the presentation outlined. “The recommended budget is a measured step in addressing the town’s priorities and building a good foundation for the future.”

Budget freezes vacant positions, prioritizes affordable housing, services

Due to uncertainty about ongoing federal funding, the proposed budget calls for a freezing and/or holding of currently vacant positions, which will help the town cover some of its federally funded positions. The town also proposes repurposing a vacant position within its Language Access program to fund two Crisis Assistance Response and Engagement (CARE) positions in the Chapel Hill Police Department.

As with any municipal budget, town leaders face critical choices for which services to increase funding for, which services to maintain funding, and which services to reduce. In addition to these freezes, Nirdlinger proposes to: discontinue the renting of large yard waste containers; along with a change in the town’s leaf collection and yard waste collection practices; an evaluation of pool operations for summer camps; and passing credit card fees for town services to users so the larger community doesn’t absorb those costs. Reducing these various programs will help the town meet what it deems more critical needs in the coming fiscal year.

Regarding services, facilities, streets, and the town’s vehicle fleet, over $413,000 is proposed to be allocated for what the town calls “cost of doing business increases,” along with: an additional allocation of $150,000 toward deferred maintenance; $150,000 for future street resurfacing projects; and $150,000 for maintaining its vehicle fleet. The budget also includes: a 5% pay increase for Mayor Jessica Anderson and the members of the Town Council, in addition to all other town employees; a 6% increase allocation for the cost of employee medical insurance policies; and a mandatory 0.75% increase in employer share of retirement system contributions. An additional $205,000 has been suggested to implement the town’s Pay and Classification study recommendations, which will kick in starting in January 2026.

In regards to affordable housing–a significant commitment of this council: the town is proposing to allocate almost 3 cents toward various projects and initiatives, which includes the town’s Affordable Housing Development Reserve, its Affordable Housing Loan Fund, and Affordable Housing Bonds, which the town claims “move us closer to securing resources to meet our funding goal to implement the town’s Affordable Housing Plan to expand and preserve affordable housing.”

While the town’s parking fund budget goes up 18.4% in this proposed budget (resulting in a larger transfer from the town’s Debt Service Fund related to ongoing issues with parking revenue) the town is optimistic that future budgets will not require such an increase once the East Rosemary Street parking deck generates more income for Chapel Hill. The public housing budget is proposed to go up by 6.8%, while the town’s transit budget is reduced by 0.5%, mainly due to the discontinuation of a contract for bus driver support.

Nirdlinger is proposing a stormwater increase fee of $5.30 per equivalent residential unit (ERU), of which approximately $3.80 would cover debt service. The remaining $1.50 per ERU would fund a new Stormwater Analyst position for Chapel Hill.

The budget proposes expenditures of $156,524,865, of which 23% would be allocated to transit, 13% to general government, 12% to the Chapel Hill Police Department, 10% for public works, 8% for the Chapel Hill Fire Department, 6% for Chapel Hill Parks and Recreation, 5% for debt service for various capital projects, and an additional 23% for other expenditures, including parking, housing, the town’s libraries, stormwater, and planning.

Council comments reflect concerns about property increases, funding gaps

Members of the town council had mixed reactions to the proposed budget. They expressed concerns about the significant tax increases and some of the proposed updates to spending on various programs and services.

“The revaluation is impacting places wildly different across the town,” said council member Amy Ryan. “I looked at a house on North Graham Street. The house value is up 88%. At the neutral rate, they’re going to see a 40% tax increase (or $440 per year). At the proposed rate, it’s going to be almost a 60% increase of $640, and that is almost $800 more per year than they were paying in 2022. On Purefoy Road, the neutral rate would bring them a 27.5% increase (or $350), 44% at the proposed rate (or a $560 increase). In Colony Woods, you’d see a 20.9% increase to $398 at the proposed rate. They would get a 36.8% charge (increase) to $700 more per year. I’m concerned that with the way this revaluation has fallen out mathematically–and with lower-cost properties and moderate-cost private properties maybe being more popular and maybe becoming more valuable at a faster rate–I’m really concerned at what’s going to happen with the tax rate with those folks. So that’s just something to think about.”

“I’m very concerned about all these things,” continued Ryan. “I do not want to ask our staff to do more with less. That’s not fair, and it’s not right, and it’s not a way to keep staff. I think we may have to take a hard look and have some hard discussions about the things we’re choosing to do and what we can really afford and what we can’t do right now.”

“We all know this is a really difficult year, and this can be a really incredibly difficult decision,” added Karen Stegman. “We have to figure out the balance between funding that our town needs, that our residents need, and higher taxes that could undermine our goals we’re trying to reach with our tax dollars. We don’t want to price people out but we also want to take care of our community; and we’re in a really terrible situation, because our federal funding, our state funding is just not there. It’s not reliable. We just don’t know what is to come.”

“We are catching up on long-deferred costs, many of which have caught up with us because we adopted revenue-neutral rates in the last decade. That was a mistake. We shouldn’t have done it, but we did, and we have to deal with the consequences now,” added Theodore Nollert. “One of the other things that I want to remark on is that I haven’t decided what I think the general fund rate should be  (but) I do think that we should go two-tenths of a cent higher on transit and get 2.5 for transit. I think that’s what the Transit Partners Committee had endorsed as a recommendation to other partners; I believe the other partners are prepared to support that. And the reason that I’m interested in that allocation, in particular, is that the service that our transit provides is a crown jewel for the town.”

“We’ve gotten a lot of emails from people about their specific situations that are really upsetting, about how they would be priced out of their homes,” added Elizabeth Sharp. “And, you know, with our Affordable Housing Partners talking about the cost of housing–and one of the things that you mentioned is the cost of your property taxes is one of the things that determines whether or not you can stay housed. That said, I would also very much like to know on the part of the public what services they would like to sacrifice if we are not going to raise their taxes? You know, we’re here to represent our community. We’re trying to do the best that we can by our community. And so we are a community with a big heart, and we very much want to actualize our compassion, but it costs money.”

“This is really, really difficult to balance in this current climate and context in which we as a town–and not just our town, but towns across this nation–are having to bear the brunt of a federal government that has abandoned us when it comes to dealing with a lot of the crises that we are facing in our communities,” said Paris Miller-Foushee. “We see it playing out on our streets, in our homes, at our grocery stores, in every capacity.”

“I’m not ready to say what rate I would go with right now,” added Melissa McCullough. “I desperately need to study the document that you gave us, but I wanted to point out a few things that I  really appreciated: I really appreciate us putting our people first. I was very distressed by hearing about reports of burnout, and we can’t afford, as you were saying, to drive away the ones who still want to work here, much less, you know, make it more difficult to hire new people. So I appreciate that.”

“I can’t imagine going lower than what you have suggested, Manager Nirdlinger,” added Camille Berry. “For me, we have to look at some of the trade-offs that we know. I say we continue with this hard discussion that we’ve already been engaged in. I say that if we say the budget represents our values, and we know that our partners are getting less through the federal government, just like we are, I’m not ignorant of that. If not us, then who will help those partners? And also, if not us, then who is going to provide the services to this town that we so appreciate? So for me, I think the hard discussion continues, and we look at a higher amount, which is definitely going to be less than if we stayed at the current tax rate.”

These are just really difficult times, and we are facing really tough choices,” said Mayor Jessica Anderson, who last week announced her plans to run for re-election this fall. “I tend to get

stressed each year at budget time and trying to figure out how to make it all work, and then we get through it and it’s okay. And this year has been the most difficult budget year that I’ve ever experienced in this job, or my job before this one. It just feels like a no-win, honestly. But

I do value that we have a council that’s trying to really be thoughtful.”

The fiscal year for 2025-26 begins on July 1. The town will have the next few weeks to continue deliberating over the budget before approving its final budget in June.

Adam Powell has been a correspondent for The Local Reporter since 2023. A 2001 graduate of UNC-Chapel Hill, Powell has served as managing editor of multiple local publications, including the News of Orange County, the Mebane Enterprise, the Caswell Messenger, and the ACC Sports Journal. Powell has won more than 20 North Carolina Press Association Awards throughout his journalism career for Excellence in Education Reporting, Excellence in Sports Columns and Features, and Excellence in Video Production. He has also been recognized by the North Carolina School Public Relations Association (NCSPRA) for Excellence in Education Writing and for his newsletters representing Rockingham County Schools and the North Carolina Cyber Academy. The author of four books. Adam currently resides in Mebane with his wife Julie and children Colt and Jenna. This reporter can be reached at:Information@TheLocal Reporter.press