The city budget rolls out, with uncertainty over a living wage increase, a survey reveals mixed opinions on the city’s performance and Council divides with developers over housing incentives
Above: Asheville City Council member Cecil Bothwell, file photo by Max Cooper
The summer is often the meat of the city’s political season for a whole host of factors, including the need to pass a budget before July 1, the state legislature’s own dramas and (this year) an election for three Asheville City Council seats on the way in November.
So when it met on May 26, Council had all that on the horizon, with the addition of continuing issues like the housing crisis and major questions over how the city should develop. The meeting would reveal more about the budget, just as it would reveal that some parts of it — including a living wage for all city employees in the face of objections from senior staff — remain uncertain. It would also show a public that, according to a regular city survey at least, has mixed opinions about their government and the future of their city. Importantly as well, among a Council where unison is the rule, this meeting would reveal some differences about how to solve the housing crisis.
Nickel and dimed
After months of conversations and special sessions, city staff were ready to present Council with its annual budget (if you want some handy breakdowns and details, courtesy of DemocracyApps, go here).
The budget is possibly the single most important undertaking local government is involved in, as many decisions about what does or doesn’t get resources come down to a single presentation, single hearing and single vote over the course of May and June. In this case, the budget’s proposed $154 million (up from $147 million last year) covers everything from police to transit to affordable housing programs, just to name a few.
“We have managed to balance our budget with a few changes in our revenue model for this coming year,” Chief Financial Officer Barbara Whitehorn said.
Specifically, the city is hiking property taxes, by 1.5 cents per $100 of property value or, Whitehorn noted, about $15 more a year for each $100,000 of a home’s value.
The hike is meant to make up for lost revenue due to the state ending business privilege tax revenues for municipalities, and brings the city’s total property tax rate to 47.5 cents. The city’s last tax hike, in 2013, was intended to help meet a number of “aspirational goals” from road improvements to more affordable housing.
“The reason we need that money is because the state has decided not to tax Wal-Mart and is happy to pass the cost along to Asheville residents,” Council member Cecil Bothwell said, discussing the issue after Whitehorn’s presentation. “That’s the effect of taking away that professional license fee that we used to collect. Big, big businesses are no longer carrying their weight.”
Under North Carolina law, property tax, along with fees for service, are the main revenue sources cities have control over without having to get a law passed by the state legislature.
On the fee front, Whitehorn also pointed to another goal of staff’s, moving more fees for city services directly onto the people who use them, meaning that the city general fund pays less and Asheville’s citizens directly pay more for everything from trash to admission to the Nature Center to throwing a block party.
“Staff has been diligently working to decrease the taxpayer subsidy for programs that could be fee or admission-supported in some way,” Whitehorn said.
In this case, that meant a considerable hike for garbage service, from $7.50 a month to $10.50 a month, or $42 more per year per household.
She also asserted that staff were continuing to try to find ways to address Asheville’s “structural gap” between how much it spends and how much revenue it takes in due to having many tourists and others who don’t pay city property taxes using city services and infrastructure.
When it came to other city funds Whitehorn noted that while the water system and parking are doing relatively well, the transit system is “under continued financial pressure” with an increase for operating costs even though no further services were being added.
Council member Gordon Smith later noted that while the city recently expanded the bus system to include Sunday service, more — like late night service and more shelters— was still needed, but he was proud of the city for “maintaining the transit budget even through the recession, even through a hostile legislature.”
The city stood ready to invest more in affordable housing, Whitehorn also noted, with $4.5 million budgeted for affordable housing-related projects by 2016 and from 2014-20 a total of $10 million budgeted, though such projections can alter depending on how the city’s revenues change over the coming year.
The city will hold a public hearing on the budget on June 9 and a vote June 23. Before the hearing, the Blade will have a more detailed breakdown of the budget and what it means. During that time, “changes are possible,” as Vice Mayor Marc Hunt noted.
Paying the piper
Another major change involved “investment in human capital” as Whitehorn put it. Pay for everyone from City manager Gary Jackson (over $168,000 a year) to a parks and rec laborer ($10.48 an hour) takes up about 64 percent of the city budget.
The city recently conducted a $200,000 “classification and compensation study” to assess if pay for its employees was competitive. The budget includes $1.6 million to adjust the pay scales for some workers according to that study’s recommendations — particularly police and firefighters — and give all city workers a one percent cost of living increase.
While it didn’t occupy the biggest amount of cash when it came to city pay scale changes, more was revealed about where the city might head on another issues of some controversy: raising all city workers to a living wage. A living wage — defined as the amount needed to make ends meet without public or private assistance — is set at $12.50 an hour without insurance or $11 with. The city adopted a living wage ordinance for its own workers in 2007, updated it in 2013 and has touted itself as a living wage employer.
But last year, a Blade investigation revealed that around 140 city workers were qualified as “temporary or seasonal” and were paid below the living wage other city employees received.
That category can, at some points during the year, encompass up to 350 workers according to the city’s own numbers. Also, despite its name, it includes all city workers who work 20 hours or less a week, including some who work regular hours throughout the year or have worked for the city for decades.
Earlier this year a majority on Council asserted they were in favor of changing that, with some saying that time had come to raise all city workers up to at least a living wage. But senior staff and a consultant proved less enthusiastic. At a May 12 budget meeting Linda Wishard, the consultant the city hired to do the compensation study, pushed back, opposing the idea of a living wage for all city workers entirely as it would “falsely inflate your position in the marketplace.”
Jackson praised the consultant’s views were that of an expert. Instead of giving a raise to all city workers who made below the living wage, Jackson said that staff would “sharpen their pencils” to distinguish within the pool of “temporary and seasonal” workers between those who might get a living wage increase and other workers who may not.
At the budget presentation, Whitehorn’s comments likewise indicated that after this year’s budget shook out, some in that pool of city workers might get a raise, but others might not. In the presentation, Whitehorn tagged the $250,000 as for a “living wage evaluation.”
“You all directed staff to look at our temporary, seasonal and part-time seasonal employees and determine which of those jobs should be at a living wage and which are truly temporary positions,” she said. “So that’s our goal.”
Hunt asked Whitehorn “on the living wage compensation item you indicated that there will be some research and study by staff about how we might adapt to that, but the $250,000 is in fact included in the budget, it’s just a matter of how we organize pay scales at different staffing levels and so on.”
“Exactly,” Whitehorn replied. “But it is included in the budget.” Hunt then asked how long it would take to clarify how that would be spent and who would receive raises, and she replied it would probably take place over the next six weeks.
If any on Council objected to staff’s plans to leave some workers out of the living wage hike, they didn’t voice opposition during the meeting.
In discussion after the budget presentation, Smith said “one of the things I’m really glad to see is our responding to the compensation study. Getting our salaries right, especially for our public safety workers, is one of my highest priorities in this budget year. Walking the talk on our living wage is also something I’m glad to hear is included in there and when we can get the rest of the way, making sure that happens.”
In the open public comment period at the end of the meeting, Jonathan Robert criticized Council and staff over its approach on a living wage for city employees, bringing with him a pack of unsharpened pencils with the names of city workers making less than living wage, in response to Jackson’s analogy, and asserting that “leadership is not outsourcing a bad decision to a consulting company so they can tell this community and Council that they can’t give these folks a living wage.”
“How about we just give all these folks, all 350 of them, the raise they deserve,” he said, adding that if that meant other city workers needed a raise too, that would be a positive outcome.
Survey says
For cities around the country, the National Research Center conducts the National Citizen Survey, measuring residents’ opinions about where they live, their confidence in the government, what they desire and more. Asheville is no exception, and a survey for our city, the first since 2008, was recently completed.
The survey shows that while people appreciated Asheville’s environment and many aspects of its quality of life, they also had some serious concerns. Surveys were sent to 1200 households and 337 answered.
Communications Director Dawa Hitch, in giving a “brief, high-level overview” of the survey, asserted the city was, overall, doing rather well.
“In responding to Asheville as a place to live, there was an 89 percent positive response and that was similar to benchmark cities across the country,” Hitch highlighted. “When we’re looking at the overall quality of city services, the response was 63 percent positive.”
Specifically, the survey results and a summary drafted for the city’s governance committee note that Asheville boasts an overall good reputation, is far more esteemed when it comes to cultural and arts amenities than similar cities and has more recreation, more volunteerism and more shopping. Compared to 2008, the survey respondents found downtown safer, walking easier, the environment better protected and emergency planning improved.
However, there were areas in which the outcomes weren’t quite so rosy. Assessment of the performance of Asheville’s government staff, particularly the police and planning staff, were lower than similar cities and than the city’s own results in 2008. The need for affordable housing had grown considerably more dire, with the responses rating Asheville much worse than both similar cities and itself in 2008. The ease of bike travel had also worsened similarly.
Since 2008, survey respondents also felt the city had become less open and accepting and that bus service, street cleaning and traffic enforcement had worsened.
“Those benchmarks are just a bit of a snapshot comparing us to other cities,” Hitch asserted. “You can see in some areas, even ones we came in lower [than other cities], the trend is moving up.”
The survey results and summaries are currently available on the city’s open government page.
Importantly, the survey also included a portion asking people to give their thoughts on an open-ended question: “What do you think is the single biggest issue facing Asheville over the next three to five years?”
While Hitch didn’t go into detail on those answers, they do shine a light on how the priorities of Ashevillians have changed.
From 2008 to 2015, Ashevillians remained concerned about planning and development issues, but less so than seven years ago. Meanwhile, concern about the need for jobs and the rising cost of living increased, as did concerns about affordable housing.
A look at some of the specific responses given in the survey about these issues reveals a bit more:
I think that Asheville needs to focus on bringing more professional jobs for young professionals, to the area.
I’m glad to see the service industry grow, however the cost of living is increasing and salaries are staying the same. As a young professional in order come to make more money, I have to relocate to Charlotte.
Economic development, public safety (police, etc).
Jobs & housing.
Work opportunities- increase wages improving transportation routes- decrease congestion.
Jobs, roads, decent pay scale.
Figuring out how to keep the tourist economy from dominating local residents needs-tourists don’t need bike lanes!
The cost of living. The hippies/artist can’t afford to live here which is why a lot of people visit. When they’re gone, then Asheville is just another mountain town!
1. Economic gap between rich & poor. 2. Educational & housing availability, affordability, & equal opportunity 3 Racial tension & prejudice.
Redirecting the city’s “social” agenda to economic realities.
Appropriate upkeep of commercial properties and city streets and sidewalks.
Do attract businesses that hire professionals for professional wages. To have the high tax base that you have, & the low salaries/wages you are creating a very “extreme” economy of “have’s & have nots”. It is not welcoming & supportive of a strong middle class which is not sustainable long term.
Many of the responses from those concerned about development also cited a lack of affordability or a feeling that developments catering to tourists had run amok, while the affordable housing goal had responses mostly saying “affordable housing,” sometimes with an exclamation point.
Hitch noted that “City Council has strategic goals and a number of the areas identified that were lower than benchmark or where there were decreases in positive responses are areas that have been identified in Council’s current strategic plan” and “that’s an important place where there’s vision and goals that’s established.”
For example, she said, when it came to transit the city started Sunday service. But going forward, the city should share survey results with their board and commission members so it could shape their policy advice to Council as well as incorporating some of the survey priorities into the budget.
‘A financial house of cards’
As if the news of the budget and the survey weren’t enough, the next matters before Council were the latest round in the ongoing fight over how the city will — or won’t — solve its housing crisis and specifically, what perks it should offer developers and under what circumstances.
In this case, developer Harry Pilos was back before Council to stump for his 243-unit RAD Lofts development. Pilos last came to the podium in September, when he received approval, over some objections, for the project and tax write-off incentives. Since September, however, the developer made changes to the plans, adding more housing units, changing the design and dropping a considerable part of the plans for commercial space.
Council has a “land use incentive grant policy” that allows developers to request a tax write-off, if their development meets a number of criteria, such as providing “affordable” and “workforce” level rents, access near a transit line, cleaning up a brownfield site and more. Incentives for “workforce” housing, a criteria that allows developers to charge rents affordable for people making up to 120 percent of median income, are particularly controversial, with critics saying such housing is out of reach of much of the city’s workforce and can end up subsidizing developers for what they’d build anyway. Their proponents assert that given the severity of the city’s housing shortage, they can be useful in certain circumstances.
Proposed developments are given a score based on how many of those, and other aspects the city considers desirable, they provide. The incentives policy is considered flawed by Council, staff and developers — something that would come up repeatedly in the ensuing discussion about incentives. But while revisions are on the way, developers are still applying under the old policy, and on May 28, Pilos was the first of two to insist that they deserved a larger tax write-off than the city’s policy recommended.
“We’re restricting our next income abilities for the next decade, we’re putting a cap on how far we can go despite the market,” Pilos said, and this was the most affordable and workforce units he could offer and still get financing. “The costs have literally almost doubled” to $55 million.
“Without any of these pieces, it does not underwrite,” he said. “This is a puzzle I put together over 18 months that now has five proposals for financing sitting on my desk saying ‘you get this done, this works.’ You pull a card out of it and it’s a financial house of cards.”
“It’s a very, very expensive project and very complex,” he added. “I don’t know how far I can push it and be socially-minded and financially viable.”
In Pilos’ case, his development scored 35 points, but he wanted 50, which would give him a tax write-off of $144,891 each year for five years.
To hear him tell it, a bigger tax write-off was the only way that the RAD Lofts would get built and provide much-needed development in the River Arts District. 12 units would be affordable housing and the rest workforce level housing. However, he also wanted the ability to raise the workforce housing apartments’s rents up to three percent a year, even if that took them above the maximum rents currently allowed for “workforce housing.”
The rezoning necessary for the revised RAD Lofts plans to proceed passed Council unanimously, but the incentives Pilos was requesting proved a good deal more controversial.
City staff were recommending approval of the deal, with Jeff Staudinger, the city’s assistant director of community and economic development, noting that the rent increases Pilos was requesting were within the norm for such city-incentivized projects around the country.
“It appears to be a necessary condition to getting this project built,” he said.
Smith praised the project for reviving a former industrial site and bringing housing to the area, noting “there’s a lot to like about this” but said he was unwilling to support the level of incentives Pilos was asking for.
“We’re talking about ending up with 12 affordable units,” he said. “Over the last few years we’ve approved what amounts to thousands of units within the city with fewer than 100 of those being affordable.”
While the city’s current incentive policy had been “a very imperfect tool,” Smith noted, he didn’t think Pilos’ project had enough affordability to merit the incentives he wanted.
This time, most on Council balked at giving Pilos the full level of incentives he wanted.
“My take-away is that we need to allocate more points for affordable housing,” Mayor Esther Manheimer said of the need to change the incentive policy, but “this is a really important project for the continued transformation of the River Arts District. It’s not just happening anywhere. It’s a dense, mixed-use development in the heart of that district.”
“I would like to send a message that our community welcomes this kind of growth,” she added.
“My take is that it’s best to be predictable when you’re dealing with developers, and we should adhere to the rules as written,” Bothwell said. “If the rules need to be changed, that’s fine, but the almost sloppiness of this doesn’t appeal to me. Ok, the policy’s wrong, but that doesn’t mean we need to make exceptions over and over again.”
Council member Gwen Wisler then noted that she would support awarding Pilos 35 points of incentives, something Smith agreed with. That would have resulted in the same amount of annual incentive, but only for three and a half years.
Council member Jan Davis moved to accept the deal with Pilos and award the project the full incentive he requested, citing the need to complete the project and the policy’s “arbitrary figures.”
“We really have not written it well,” he said of the policy. “This is urgent, this thing has been dragging on and on.”
But when he failed to find more support, Davis withdrew the motion. Council member Chris Pelly proposed an alternative motion, to approve the incentives for four years instead of five, “as a kind of middle ground.”
“Thirty-five is the rule,” Bothwell said, just before the incentives passed 5-2, with he and Smith against. Pilos had left, and did not indicate if the somewhat lower level of tax incentives would cause his “house of cards” to collapse.
Round two
But Pilos wasn’t the only developer who wanted incentives above and beyond what Council’s policy supposedly allows. The very next item on the agenda were similar incentives for River Mills Lofts, with developer Pace Burk requesting a tax refund of $117,757 for five years for a development with 18 “affordable housing” units and 216 “workforce housing” units near Biltmore Village. Normally the project would’ve been ineligible for land-use incentives because it wasn’t technically close enough to one of the transit corridors define by the policy, but the developer asserted that there are transit routes nearby and that infrastructure in the area is expanding. Council was, overall, sympathetic on that point.
Pelly asked Staudinger, in this case, why the developer felt they deserved more points for offering affordable housing than the formula normally allowed (the formula would’ve given them a tax write-off for two and a half years and staff recommended three). Staudinger replied that they got to the result “much the same way Mr. Pilos did.”
“This is indicative to me of the slippery slope we face when we start making exceptions to our rules,” Bothwell said. “I’m going to oppose this because it doesn’t fit the definition.”
Smith noted that on Council’s Housing and Community Development committee, the members hadn’t been able to come to an agreement either and so had passed the incentives for the project on without a recommendation one way or the other.
Staudinger noted that staff “are working as quickly as we can” and would have a revised incentive policy before city committees in June.
Architect Clay Mooney, representing the developer, said that while the project didn’t have as much commercial space as the city’s incentive policy desires, that was because it was the first such denser development in the area, so the traffic to make more commercial space viable simply wasn’t there yet.
“This is a pioneer development in that area,” he said. “Pace has worked very diligently, he’s tried to find a way to incorporate affordable and workforce housing within this development. Unfortunately, as Mr. Pilos laid out to y’all, financing is a reality every developer has to face” and that without the incentives provided for five years, Mooney claimed it was hard to get the numbers to work out.
Smith noted that when the zoning for the project was approved, Council had asked Burk to bring a proposal for more affordable and workforce housing back.
Wisler had questions about how many of the policy’s criteria the project met, and asked Staudinger if it had earned 30 points by just “getting to 20 and adding 10.”
“More or less,” Smith added.
“I would hate to feel that we were so random, though that would seem to be in line with the policy as it’s practiced,” Staudinger said, noting that additional points were granted for the amount of “workforce housing” the project would provide.
Wisler moved to approve the project at three years of tax incentives, not five, and that passed 6-1, with only Bothwell against.
“We’ll get those changes to everyone as quickly as possible,” Smith said, of the upcoming reform of the incentives policy.
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