Unpaid FEMA claims force Waynesville into budget reckoning
Members of Waynesville’s Town Council (left to right) Chuck Dickson, Julia Freeman, Mayor Gary Caldwell, Jon Feichter and Anthony Sutton emerged from a seven-hour budget workshop with a hard road ahead.
Cory Vaillancourt photo
Crumbling promises and frozen FEMA reimbursements cast a long shadow over Waynesville’s budget retreat, where town officials confronted a stark reality — a $5.4 million deficit for the coming fiscal year, nearly $4 million of it tied up in lagging FEMA reimbursements from Hurricane Helene.
With insurance costs climbing, mandated retirement contributions rising and capital requests topping $20 million, Waynesville Town Council will now face what one member called “the worst ever” budget picture in recent memory.
For all the alarm in the room, Waynesville’s current fiscal strain did not emerge overnight. The town’s budget over the past six years tells a story of pandemic shocks, tourism rebounds, aggressive pay adjustments, rising insurance costs and, ultimately, a natural disaster that upended even cautious financial planning.
In the 2020-21 fiscal year, COVID uncertainty shaped a $15.75 million general fund, with flat property taxes and cautious revenue projections based on a property tax rate of $0.4957 cents per $100 in assessed value. Sales tax volatility and economic slowdown pressured operations, requiring a $1.45 million fund balance utilization while deferring equipment and capital spending.
“In Fiscal Year 2020-21 the budget team has had to revise the original financial plans for the upcoming fiscal year and adjust the Town’s finances to reflect a rapid downturn in revenues,” read’s the annual budget message. “The ‘Shelter in Place’ policy and closing of non-essential businesses has severely damaged Waynesville’s economy.”
Rising health insurance (3%) and retirement costs (1.2%) also strained personnel spending, which accounted for 69.44% of all town spending.
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A countywide, state-mandated property revaluation drove a 25% residential tax base surge in the 2021-22 fiscal year, lowering the revenue-neutral rate to $0.4127. The board adopted $0.4392 instead, just as the budget message acknowledged the town’s projections on the fiscal impact of the Coronavirus Pandemic were “overly pessimistic” — thanks to an unexpected tourism boom that saw people scrambling to escape major cities for the relative isolation of Western North Carolina. The $17.14 million general fund prioritized a major pay plan overhaul, career track raises and deferred capital spending, with no water or electric rate increases, a 10% sewer hike tied to plant debt and $984,000 in general fund balance utilization.
For the 2022-23 fiscal year, the general fund and tax rate remained flat at $17.08 million and $0.4392, respectively. Personnel still accounted for 69% of spending as the town completed market pay adjustments and added a 2% cost of living adjustment. President Joe Biden’s American Rescue Plan supplied the first of what would ultimately become more than $3 million in funds, reducing capital spending strain.
In the 2023-24 budget, COVID-era supply chain disruptions lingered, increasing the cost and limiting the availability of everything from building materials to vehicles. Revenue growth was slim but would allow a slightly higher $17.45 million general fund based on that same $0.4392 property tax rate. In the continuing struggle to retain high-quality employees, a 2% COLA was funded, and no general fund balance was appropriated; however, personnel and fringe benefits grew to 77.9% of all town spending.
By fiscal year 2024-25, the general fund would reach $19.07 million, driven largely by employee compensation pressures and a property tax rate increase to $0.479. The town was in the last year of using assessed property values from the 2020 revaluation — when market-to-actual values lag most — but could look forward to a fresh set of values for the 2025-26 budget.
Then, just three months into the 2024-25 fiscal year, Hurricane Helene changed everything.
As the town dug out from under the unexpected expenses associated with the extreme weather event, the 2025-26 fiscal year represented a significant challenge. Six months after the storm, most local governments, including Waynesville, hadn’t seen a nickel in federal reimbursements. Haywood County commissioners voted to postpone the property revaluation out of sympathy for those who had lost property — and lives — until 2027. Waynesville’s budget retained the $0.4790 property tax rate, producing a $19 million general fund that remained essentially flat.
The town’s steady march through shifting economic conditions, from COVID to revaluation to Helene, brought Council back to the current budget planning cycle, where Finance Director Ian Barrett stood before them on Feb. 27 — not to recount history, but to outline the narrowing margin for error ahead.
B
arrett opened the session by presenting the town’s financial position, beginning with year-end figures from the prior fiscal year and progressing toward projected cash for fiscal year 2026-27.
Revenues for the current fiscal year appear generally on track. Through Feb. 19, the town had collected 76% of its $19 million general fund budget. Ad valorem tax collections were at 98%, and prior-year collections exceeded projections. Currently, the total amount of property taxes still owed to the town from the past 10 years is an astonishingly low $4,327.
Sales tax collections stood at 44.5% through five distributions, totaling $2.1 million against a $4.7 million budget. That may appear off, but it’s simply a trick of the calendar, as sales tax distributions roll in with a two-month lag; Barrett noted an 8% year-over-year increase in sales tax through that point and recommended budgeting a 2% to 3% increase next year, but he cautioned that the December distribution would better indicate whether revenues were stabilizing or softening.
On the expenditure side, state-mandated employee retirement contributions will rise to $946,308 — an $81,787 increase. Similarly mandated law enforcement retirement contributions will rise to $542,885 — a $62,799 increase.
“These are what we have to pay as employers,” Barrett said.
Health insurance looms as the most dramatic increase. Preliminary estimates project a 33% hike.
Town Manager Rob Hites asked whether the weakening of the Affordable Care Act was contributing to the spike. Barrett said it was.
“We are now seeing a rate increase passed on to us because of the changes in the administration,” Hites said, referring to the Donald Trump White House. The projected loss of Affordable Care Act participants stems from federal policy changes — championed by Congressman Chuck Edwards (R-Henderson) — that cut ACA subsidies.
Town Council Member Anthony Sutton said the health care coverage cost projection aligned with what he’d heard from other municipalities.
Workers’ compensation insurance is projected to rise 7%, and property and liability insurance 12%.
Against that backdrop, Barrett presented a stunning bottom line — $19.2 million in projected general fund revenue against $24.6 million in expenses
Outstanding FEMA reimbursements account for approximately $4 million of that gap.
“I want to stress that so much of that is FEMA tie-ups,” Barrett said. “It’s stuff we could get, but we’ve been at it for almost a year and a half, and here we are.”
Waynesville officials say FEMA has reimbursed only about 13% of Hurricane Helene damages, leaving the town exposed to millions in unrecovered costs. Frustration is mounting as denials, delays and reversals threaten a second budget cycle without adequate federal recovery funding.
Council members repeatedly voiced continuing frustration at the federal reimbursement process, describing projects in “FEMA purgatory” and funds “not obligated” despite repeated assurances and constant effort.
Insurance and proposed salary increases add another $1.4 million. Waynesville officials have begun a multi-phase pay classification overhaul, focused on initial adjustments for below-market positions. While aiming to stay competitive without leading the market, leaders weighed salary alignment against FEMA uncertainty, infrastructure demands and broader budget constraints.
Hites placed the shortfall in a broader context, noting that Haywood County government remains roughly $14-16 million short on reimbursements. The county’s budget retreat will be scheduled for some time in mid-March, when further impacts will become more visible.
Meanwhile, department heads have submitted $20.12 million in capital requests so far — including fire, police, electric, water and sewer needs. Those requests will remain largely unfunded under current projections.
Utility rate adjustments could offer incremental relief. A 2% water rate increase would generate about $67,497, while 10% would produce roughly $337,488. Sewer increases range from $84,150 at 2% to $420,750 at 10%. Electric increases range from $210,010 at 2% to more than $1 million at 10%.
Notably, Council hasn’t yet decided on implementing such increases, as the budget is only in the preliminary planning stages and will change often before it’s passed, likely in late May or early June. But those discussions carry political weight, especially for residents on fixed incomes.
“Those have been scenarios that have been brought to my attention,” Barrett said. “Recently, I’ve been having more fixed-income customers call me directly. Trying to come up with good solutions as we look to this next budget year, I think that’s really important.”
The conversation repeatedly returned to growth. A one-cent increase in the property tax rate generates about $153,663 in revenue. Barrett estimated the town is short 7 to 8 cents on the tax rate simply to maintain current service levels, accounting for FEMA delays and mandated spending increases.
“Let’s just be honest,” Sutton said. “We either have to raise the taxes, increase your tax base, or you have to cut your expenses. That’s your only three options.”
Recent growth added about $30 million in property value, generating roughly $150,000 in new revenue. But that alone cannot offset a multimillion-dollar shortfall.
“We either grow or we die,” Sutton said.
The looming 2027 countywide revaluation adds another layer of complexity. That revaluation will affect the town’s 2027-28 budget, potentially increasing the tax base significantly. Council members will then face a pivotal decision — adopt a revenue-neutral rate or retain some of the increased revenues to address structural costs.
“You’ll have to look at that revaluation as tremendous opportunity. And I really don’t recommend anybody going out and saying, ‘I promise you that we’ll go revenue neutral,’” Hites said. “You may very well need every bit of that, plus a couple cents [on the tax rate].”
For now, council appears to be crafting the 2026-27 budget with that longer horizon in mind — balancing immediate fiscal triage against strategic positioning for the post-revaluation year.
“We’re not alone in this,” Barrett said of FEMA delays and insurance spikes. But the numbers, as he told council earlier in the session, “don’t lie.”
Waynesville’s budget workshop closed without any final decisions, but with clarity on the scale of the challenge.
Between frozen federal reimbursements, mandated cost increases and uncertain revenue growth, town leaders now face months of difficult deliberations — weighing service levels, tax burdens and long-term stability in a region that’s beginning to realize real recovery may never come.
