Tough budget discussions ahead for Waynesville
The Waynesville Town Council at the budget retreat. File photo
Preliminary projections from Town of Waynesville show a tight budget for the upcoming fiscal year. Elected officials don’t want to raise taxes, fees or utility rates, but a variety of factors that all came together in a perfect storm will leave Town Council with some tough decisions after a budget retreat held March 21.
“We certainly can balance, but it’s going to be the leanest year since I’ve been here,” said Town Manager Rob Hites, who was hired in 2016 and called this year’s proposals “a hold the line” budget.
That “perfect storm” includes Hurricane Helene, which decimated Western North Carolina, Haywood County and parts of Waynesville on Sept. 27, 2024. The Town’s damages totaled nearly $4.7 million, including $2.1 million in recovery projects from the general fund, $2.4 million from the sewer fund, $155,000 from the water fund and $35,000 from the electric fund.
More than $800,000 has already been spent on completed projects.
Those projects are paid for from the town’s fund balance accounts — the equivalent of a household savings account — and are later reimbursed through insurance or by FEMA. Municipalities, however, must maintain a certain level of fund balance to avoid running afoul of the state’s Local Government Commission, a financial watchdog.
Waynesville’s general fund balance is currently $13.9 million, or about 73% of the town’s estimated annual expenditures of $19.7 million, but $1.4 million in fund balance is either restricted or already assigned, bringing the total available to just over $12 million. Hites said that to keep the town in good financial shape and qualify for the best loan rates, the town can’t dip below 36%, meaning there’s really only $3.3 million left to spend, with $3.8 million in projects not yet complete.
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Municipal governments often use fund balance in annual budgeting to make relatively small adjustments that balance the budget, or to make minor purchases that aren’t budgeted for in other categories, but that doesn’t seem to be an option for the town this year.
Adding to the complexity of the 2025-26 fiscal year budget, which must be passed by July 1, sales tax revenues are projected to be down slightly due to commercial disruptions caused by Helene; state-mandated retirement plan contributions will go up; the first $1.2 million loan payment for the Town’s new wastewater treatment plant comes due; employee salaries and cost-of-living increases are optional, but important for employee retention.
Department heads have submitted requests for an additional $1.75 million in capital projects, but those will be a tough sell this year. Over the past few years, Council Member Anthony Sutton has pleaded with Council to establish a capital project priority list to no avail. A list, or rather schedule, would help the town peck away at its growing capital project backlog each year, instead of scrambling for money to pay for the most urgent needs at the last minute as equipment and facilities near the end of their useful lives or fail.
A previously scheduled county-wide property tax reappraisal — which had been trending towards a 20-30% increase in property values — was postponed by Haywood County Commissioners a month after Helene, to allow businesses and property owners to focus on recovery in the absence of meaningful aid from the state and/or federal government.
When a reappraisal occurs and property values go up, elected officials have basically three choices: lower the existing property tax rate to maintain revenue collections at pre-reappraisal levels, maintain the existing property tax rate to cash in on additional taxable value or split the difference with property owners, setting the tax rate so that some additional taxable value can be captured as revenue.
That option would have given the town some flexibility, but it won’t be an option for this budget year, or for the 2026-27 fiscal year.
Even optimistic financial news is tempered by the impact of Helene. Since 2020, taxable value of all property within the town has increased from $1.26 billion to $1.55 billion, despite a development moratorium tied to capacity issues with the town’s old wastewater treatment plant. Over the past year, the town added $38 million in taxable value, but the town doesn’t yet know how much taxable value properties may have lost due to storm damage.
“I’m very leery of [anticipating] any tax [collections] increase,” Sutton said.
One positive — and highly anticipated — development that could help next year is that when the new wastewater treatment plant comes online later this year, development can begin again. With that comes increasing property values, and therefore increasing property tax revenue collection.
“They’re standing in line outside of Olga [Grooman, assistant development services director]’s office right now,” Hites said of developers waiting for approval to begin projects.
But that, too, has a downside — most development projects take two to three years to come to fruition, meaning there’s nothing in the pipeline right now and it’s unlikely the town will see new developments come online for a few years, as the affordable housing crisis continues to price middle-class Americans out of home ownership.
“Could you imagine what would happen if we could have had additional housing coming online? How many thousands of people in Haywood County are without homes because of the flood?” Sutton said. “To me, that was very short-sighted.”
The Town expects to hold another public meeting for budget discussions in the near future, and hopes to present the first formal draft of the budget at Council’s first regular meeting in May.
