The backlog is one of three "hard truths" that the town has to face in planning its budgets over the next five years, Interim Town Manager Chris Blue and senior town staff told the Town Council at Saturday's annual retreat.
Blue noted the town is failing to provide employees with the resources to do their jobs and to pay them competitive wages, as well as meet the critical affordable housing need.
"It may seem like our needs are overwhelming, and in some respects, they are," Blue said.
"None of what we're talking about here is extravagance. These are essential needs," he said. "I look at our budget adds and expansion requests from year to year. There's no gold-plated toilets in there."
Chapel Hill, like many other governments, is not seeing its revenues keep up with the rising cost to provide services, staff said. Amy Oland, business management director, noted the consumer price index, which measures the cost of goods and services, is up 8.6 percent.
Staff burnout and turnover also is high, staff said, as employees leave to seek better pay and homes they can afford in other communities.
The town's services are also showing cracks, they said, with nine of the town's 16 garbage trucks recently taken off the road for repairs, and 60 out of 80 police vehicles due for replacement. Police cars last an average of three to four years, Blue said.
In addition, three of the town's five fire stations no longer meet firefighting needs, fire trucks are being taken off line for repairs, and the town still needs a new training facility, Chapel Hill Fire Chief Vence Harris said. He noted that Station 4 on Weaver Dairy Road Extension was shut down in October and November, because four of its eight trucks were being repaired.
Tax Rate Increases, Town Priorities
Staff presented a few options, including one that would raise $11 million over five years by implementing a 4-cent per $100 valuation tax rate increase next year, followed by 1.5-cent increases in each of the following four years.
The town's tax rate is now 52.2 cents per $100 in property value, amounting to a $2,088 town tax bill for the owner of a $400,000 home. An additional penny on the current rate raises about $958,000 for the town and costs the owner of a $400,000 home an extra $40 a year.
Staff also offered less ambitious plans, including one that would meet roughly $5 million in parks, vehicles and facility needs with a 5.65-cent tax rate increase over five years.
A third plan would raise roughly $1.3 million over five years for parks and affordable housing, by requiring only a 1.3-cent tax rate increase this year.
"We just can't keep putting things off," Blue said. "We have significant backlogs of unmet needs, from police cars and playgrounds to fire trucks and frontline staff, and we've really got to start taking some decisive action."
The proposed plan would spend at least $9 million over the next five years to:
— Attract and retain quality employees: The town needs to offer fair and equitable wages and a better work/life balance, Blue said. Employees also need reliable equipment to do their jobs.
Backlog: $1 million for employee recruitment and retention and $3.2 million to add new positions
Five-year spending goal: $2.5 million.
— Provide core services: The cost is rising, and the town is running out of one-time pandemic recovery funds that have paid for technology needs and programs. Town departments have already cut the fat from their budgets, Blue said.
Backlog: $6.8 million
Five-year spending goal: $2.3 million to expand some programs and cover increasing costs.
— Building maintenance and repairs: A 2017 town study found a $10 million backlog in building maintenance and repairs, which the town started to address in 2018. Then-Town Manager Roger Stancil reported the town's tax base since 2008 had not kept pace with its rising costs.
COVID delayed that work but also provided the town with higher sales tax revenues and one-time funding from the federal CARES Act and ARPA in 2021 and 2022. But the pandemic money is running out, Blue said, and the town only met 3 percent of its building maintenance needs this year.
Backlog: $10.1 million
Five-year spending goal: $1.6 million to begin addressing parks and recreation and public safety needs, including major infrastructure failures at three fire stations, Cedar Falls tennis court repairs, repairs or replacement of the downtown teen center and the town's skate park, and community desires for pickleball courts, splash pads, greenways, and a Legion Road park.
— Replace and maintain town vehicles: The town has about 400 vehicles, in addition to fire trucks and buses, and roughly 53 percent of those are either due or past due for replacement, staff said. That is increasing the need for repairs and maintenance, and affecting the ability of town employees to deliver services, they said.
Backlog: $9.3 million
Five-year spending goal: $2.1 million.
— Affordable housing: Recent estimates showed the town needs another 10,000 units for low- and middle-income workers, Mayor Pam Hemminger said Saturday. At the same time, federal tax credits are requiring towns and developers to pay several million more dollars per project, because the cost of building, renting and buying homes is also rising, staff said.
The town has spent most of its affordable housing money, including a $10 million bond.
Backlog: $30 million
Five-year spending goal: Staff suggested adding over $286,000 to the affordable housing reserve fund next year, which could subsidize four affordable units.
2009 Recession, Taxes, Fund Balance
Blue is not the first town manager to warn about the looming budget problems, some of which stem from cuts and projects delayed during the 2009 economic crisis. Council members have only voted to raise taxes in five of the last 14 years, for a total cumulative tax rate increase of 6.68 cents since 2009, or less than 1 percent each year.
The current rate of 52.2 cents per $100 in property value was set in 2020. Chapel Hill property owners also pay county taxes and a special district tax to support the Chapel Hill-Carrboro City Schools.
Councils have filled previous shortfalls with one-time funding, such as federal COVID recovery funds; by not filling vacant positions; and by squeezing savings — known as unassigned fund balance — from each year's budget.
The fix is not as simple as reallocating the town's existing revenues, because the town's $76.7 million operating budget is already lean, Blue said Saturday. Roughly 75 percent of the operating budget pays personnel costs for over 700 town employees.
The town's special funds comprise another roughly $58 million for transit, stormwater, parking, housing, debt and capital projects, including repairs and big-ticket purchases. Those expenses were not included in Saturday's discussion.
The council will begin its 2023-24 budget discussion in earnest at a March 15 work session, Blue said. The council typically holds public hearings in May after receiving the town manager's recommended budget and adopts a final budget in June.
There is "going to be a tax increase" this year in Chapel Hill, Hemminger said Saturday. She emphasized that affordable housing, parks, employees, and safe equipment and living conditions remain top town priorities.
"I am hopeful that, as we add more tax base, we do it more efficiently and effectively, because we're not sprawling, because that's not who we are, and so I'm hopeful that we'll find some balance at some point," Hemminger said.
Council members also expressed interest in looking at different options.
Nothing is off the table, Mayor Pro Tem Karen Stegman said, while Council member Adam Searing suggested looking for additional savings and service cuts, town assets that could be sold to raise money, and the needs that could be further delayed.
Council member Michael Parker also suggested a closer look at town priorities. It's not a surprise, Council member Camille Berry said, as she and Council member Paris Miller-Foushee also expressed concern for morale and budget effects on town employees.
The proposed cuts and tax increases are "long overdue" and are "going to be painful," Parker acknowledged.
But "I think it's really important to keep track of what you're proposing to us," he said. "At best, it's a start. At best, it's a patch, but it's not really taking us all the way to financial sustainability over the long term."
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