Town of Chapel Hill Approves $170 million 2026-27 Budget Without Raising Taxes

GOVERNMENT

By Adam Powell
Correspondent

Chapel Hill’s Town Council unanimously approved its $170 million budget for fiscal year 2026-2027 on the evening of June 10. Town leadership approved a 3.6% increase in spending over prior years, which includes a 4% market pay increase for employees, $2.4 million allocated to specific focus areas, and additional grants totaling $274,500, without raising property taxes.

“There is no property tax increase, which leaves our rate at 50 cents per $100 of assessed valuation,” explained Chapel Hill City Manager Ted Voorhies. “Our priorities in creating this budget were grounded in our commitment to supporting our employees with competitive compensation and sustainable benefits, funding and strengthening our core municipal services, advancing (the Town Council’s) strategic priorities, and progressing towards fiscal sustainability, guided by our five-year budget outlook.”

Voorhies initially presented the council with a recommended budget of $169,718,808 in the spring. But the town is receiving a $20,000 AARP grant for the Vision Zero crosswalk project along Legion Road. The town also revealed the finalized amount for its Federal Transit Administration (FTA) Section 5303 Grant funding. Section 5303 is a federal formula program that funds metropolitan transportation planning. Chapel Hill has learned that it will receive $274,500 in 5303 funds, bringing the total approved budget to $170,013,308.

Using the fund balance following the revaluation process allows a periodic halt to tax hikes

Chapel Hill was able to achieve an additional 3.6% in year-over-year spending without raising taxes by relying on approximately $500,000 of its approximately $3 million existing fund balance. Voorhies indicated that the budget aims to reduce reliance on future fund balances while also investing in the workforce and advancing strategic priorities. Along with the 4% increase in market pay for its employees, the budget includes funding for an approximately 11.5% increase in employee insurance expenditures.

“We are stewards of multiple funds and multiple budgets,” Voorhies said. “This budget provides resiliency to handle an unpredictable future, (and) reduces our reliance on budgeting fund balance on an annual basis. We brought that (our fund balance spending) down to only half a million. It makes significant progress in funding the operational priorities outlined in our five-year budget outlook. It makes workforce investments in market pay benefits and adds three new positions.”

Whereas Carrboro utilized approximately $3.8 million in available fund balance for its fiscal year 2025-26 budget, Chapel Hill did not allocate fund balance in its 2025-26 budget because it adjusted its property tax rate following a countywide property assessment reevaluation.

Before the reevaluation, town residents were paying 59.2 cents per $ 100 of their properties’ assessed value. And while the tax rate went down considerably – from 59.2 cents to 50 cents – the increased assessed values of homes essentially meant local taxpayers were paying more in county and local taxes even though the rate itself went down.

With additional revenue in this year’s budget over expenditures due to increased assessments, Chapel Hill was able to use a portion of those funds to fully fund its budget without increasing the current rate.

“Our policies suggest that any overage beyond our required policy-based savings – that’s what most people call a fund balance – is available for re-appropriation,” Voorhies continued. “And so this last year, we had approximately $3 million to consider. The council considered that and made some allocations, and we look like we’re going to be in the same boat this year.”

Town leaders are optimistic that Chapel Hill will be even less reliant on fund balance in future budgets, thanks to additional revenues from the property tax reevaluation process and the fiscal stewardship of town staff.

“I support the philosophy behind this budget,” said council member Amy Ryan. “I think we’re making big strides in investing and getting the town on a sustainable fiscal path that we’ve been working on for many years. I’m so pleased to see that continuing, and really happy. I think it’s going to put our town in a good position. It’s a solid budget. I think this budget is good stewardship of our community’s tax dollars.”

“I will reiterate that I really am pleased that we’re, I think, relying less on fund balance,” added Mayor Jess Anderson. “Really taking additional steps to create a sustainable budget for the future is exciting to me, even if it’s not maybe the sexiest topic. But I think it is really exciting.”

No extra funds set aside -at least this year -for libraries and parks/recreation

Voorhies addressed and acknowledged the reality that Orange County is looking to phase out its library funding – currently over $600,000 annually – as well as reduce funding for recreation and parks. These cuts will put more of the onus on Chapel Hill to fund its libraries and parks in the years to come.

“The initial proposal from Orange County was to reduce library funding over two years,” Voorhies said. “We understand there’s an amendment to reduce it over three years, so that does sort of change that number a bit. There’s also an amendment that appears to reduce support for parks and recreation services. At this point, our approach is not to take any drastic measures, understanding that the decisions aren’t final, but we do have contingency plans for how we might address these things.”

Voorhies outlined several possible contingency measures to help the town raise additional funds for libraries, parks, and greenways. Options include charging fees to non-town residents, adjusting service levels by reducing hours or days of operation, increasing room rental fees, and, for parks and recreation, adding team or field rental charges.

“All of those things would be typically on the table for any kind of budget cut scenario,” Voorhies explained. “We don’t want to rush into any of this. We just know these are options.”

“Someone messaged me saying that the posture is that with this $3 million fund balance that we can pay for our own library (in Chapel Hill),” said council member Paris Miller-Foushee. “How do we reconcile that? What is our response to that posture?”

“I think I would frame it in sort of an equity framework where town residents are also county residents,” said Voorhies in response to Miller-Foushee. “So, whenever we’re looking at the services delivered, we need to think about who pays and who benefits.”

The Town Manager indicated that while charging non-residents fees at the library is a worst-case scenario for Chapel Hill if it loses all county funding, it does provide more equity for those residents who are already paying taxes and utilize library services.

“We’ve tried to operate the library as a community asset,” Voorhies explained. “When we receive funds from other funding partners that other non-town residents pay into, then that allows us to share those benefits more widely and feel comfortable that we’re equitably sharing that resource.”

“At some point, if that changes, so that only town residents are paying for something, I think we owe it to our taxpayers to make sure that we’re not subsidizing non-town residents with free services, essentially,” he added. “And it’s a tough thing to have to tell folks who might be benefiting from a service that that situation has changed, and through no fault of their own, we’re going to have to consider fees perhaps. It’s not something that they chose to do. But when that circumstance changes, we need to consider it and think hard about it, and try to be responsible to the folks who pay the bills in this community.”

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. 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