Buncombe Commissioners Consider Reserve Funding - TribPapers

Buncombe Commissioners Consider Reserve Funding

Buncombe County's debt service is projected to double by 2029, and this does not even include paying for things the commissioners have promised voters like affordable housing projects and greenways. Escalating and substantial tax increases, another bond referendum, setting up a capital reserve, and making deep cuts were some ideas batted around.

Asheville – Instead of having another exercise in setting priorities, which tends to grow the budget to fund nontraditional roles of government, Buncombe County Manager Avril Pinder said this worksession, previewing the county’s budget for FY2025, was going to focus on neglected capital needs. The commissioners’ recurring priorities, like funding affordable housing and providing more early childhood education, were already “baked into” future budgets, she said.

The meeting came to life when presenter Jay Shih projected that the county would have to more than double its debt service by 2029. In absolutes, the county would be paying $45 million a year, or nine cents of the tax rate instead of the historical four, on debt service. This projection included neither increases to fund wish list items like the Ferry Road and other affordable housing projects, a low-barrier shelter, fleet electrification, and greenway expansion; nor unspent funds from county bond revenues. Shih said expenditures would start to ramp up in 2025, so the commissioners were looking at a tax increase of at least one cent for capital improvements alone. They could, alternatively, float more bonds or make deep cuts.

Commissioner Al Whitesides said the county had been kicking the can down the road, and now the can has hit the wall. The county could no longer afford to pander to groups that “make the loudest noise.” Out of respect to taxpayers, he said the county must look into making deep cuts and direct resources first and foremost into making sure essential services, like criminal justice, are adequately funded. Chair Brownie Newman and Commissioner Amanda Edwards agreed that triage was in order. Newman said that pragmatically, the commission did not have the time during its meetings to take a deep dive into budget cuts and suggested forming a commissioner subcommittee to vet projects.

The county’s new CFO, Melissa Moore, suggested another approach for funding large capital projects, and that was to create a reserves policy. This would be different from the county’s fund balance, which is simply the county’s surplus. A reserve would be a dedicated line item, in this case, for capital projects. The county already has a capital improvement plan, but that was contingent on the county having a surplus. It had no surplus last year and had to dip into its fund balance. Before that, the budget had been bolstered by the COVID stimulus.

The county maintains a AAA bond rating, which means it qualifies for the best interest rates available. To keep that rating, however, it must show it has the ability to fund projects and not default. Going back to Shih’s presentation, Moore said the county’s debt is currently $370 million. Projects in process but not yet funded could increase that amount by $190 million. Then, on top of that, are the wish list projects, which would raise the total by another $320 million.

Moore illustrated the old adage that goes, “Those who understand interest earn it; those who don’t, pay.” Given that every cent of the county’s tax rate currently raises about $5 million in revenue and the county can currently earn 5% on new investments, having a reserve could generate an additional $250,000 for every $5 million invested by the county, whereas funding a project with debt would pay the banks $2.4 million for every $2.6 million left to go into a project. Newman said he liked the idea in theory, but the hard fact was the county had to frontload funds into its reserve, and given that the county was looking at significant tax increases already, he questioned whether this was the year to lay this on taxpayers.

Toward the end of the meeting, Rachael Nygaard, who oversees contributions of public funds to organizations that are not a part of county government but are performing services considered appropriate for government, spoke of a contract valued at $250,000 over three years. AVL Rise, a program of OpenDoors Asheville, trains and pays struggling high school students to mentor struggling elementary students. The contract for literacy training had to be rebid, so it seemed Nygaard was angling for a permanent line item. She said the Science of Reading program, which AVL Rise uses, was wildly successful in Washington, DC. OpenDoors would like to grow the program to include 100 students next year, but it only had 28 students last year. Asked by Newman why this program is so slow to grow in Asheville, Nygaard said people are still getting over the COVID scare, and the program will be operating out of four schools instead of just two.