Crunch the numbers

by David Forbes April 12, 2016

Council gets a first look at the budget, hikes (some) fees, checks up on short-term rentals and tries to take a swing at (eventually) solving West Asheville’s parking crunch

Above: Asheville City Council member Gordon Smith. File photo by Max Cooper.

By the time Asheville City Council settled in for its March 22 meeting, events elsewhere — events that would dominate the coming weeks — were already overshadowing the wranglings of local government over issues like fees and parking. The same day the North Carolina general assembly declared it was going into a special session to pass HB2, which it would do in just 12 hours the following day. That’s the bill with sweeping cuts to LGBT, non-discrimination and labor protections that, to put it mildly, has attracted just a bit of pushback locally.

Meanwhile, Council’s session that day was focused on the details of its annual budget. Passed every year, this massive document lays out how city government will spend its money, where and on whom. In early Spring, Council sits down with city staff to hash out whether it will raise taxes, how much it will hike fees and generally what to do with $154 million (that was the rough total last year). Staff, of course, have their own recommendations, as do no shortage of locals. While the lion’s share of the budget comes down to a single vote in June, it affects everything from trash to housing to the police department, just to name a few. The deliberations began at this meeting, though there’s still plenty more of those ahead too.

This year, staff provided Council with a rough lay of the land (and some suggestions, not always without dispute) of their own and the elected officials passed the fees (with one main exception) a bit earlier than they did last year.

There’s still a lot more to come in hashing out the budget, of course, especially since the city just finished one whirlwind local election year and likely has another one coming. Council picks things up again this afternoon, with a budget session at 3 p.m. They’ll have a lot to deliberate on, including a study the city’s disparities, transit changes, overhauling a public housing development, loans for small business and more. And, yes, at their regular meeting they’ll vote on an HB2 resolution as well.

Cash counting

“We’re excited to be here today,” City Manager Gary Jackson told the assembled Council, officials and a conference room packed with media and representatives of local non-profits and citizens group. Staff, he said, was devoted to “laying out those issues for you and moving the rest of the budget forward.”

Most of the presentation was laid out by Chief Financial Officer Barbara Whitehorn, who notified Council that staff were looking for more general direction, with more specific decisions the topic at the April 12 meeting.

Overall the budget looked promising this year on the revenue side, Whitehorn said, estimating a two percent increase in property tax revenues (due to newly developed properties), sales tax revenues up more than six percent, beyond the city’s initial forecast, and development fees on the rise due to the recent construction boom. The city’s share of revenues from the state liquor monopoly was also set to rise. Fuel costs are down.

But a major issue in recent budget cycles has been the state legislature, which has trimmed or ended revenue sources going to local municipalities: the end of a business privilege tax last year was one justification a majority of Council used for raising property taxes. In this year’s short session, Whitehorn noted, Powell Bill funds, which go to sidewalks, street resurfacing, greenways and more, is “a little bit up in the air” because the legislature allowed cities the option of hiking their vehicle fees instead to generate money for street resurfacing.

“So the fact the Powell Bill’s in play is an effort to shift taxes from state to local governments?” Council member Cecil Bothwell asked.

“Absolutely,” Whitehorn replied.

“So they can blame us,” Bothwell said, when taxes and fees go up to compensate for the lost revenue.

Streets and transit were a major focus of the discussion, as the majority of Asheville’s streets are in “poor” or “very poor” condition, in desperate need of resurfacing and maintenance. The city’s infrastructure languished during the decades when much of the city’s core was largely abandoned and afterwards the rapid population growth and influx of tourists strained it further.

To help address that situation, Council looked to hike the local vehicle registration fee from $10 to $30 a year to provide additional money for street maintenance. It wasn’t the only fee hike proposed: staff sought hikes to stormwater, water, the civic center and the aforementioned vehicle fee

“There’s a big backlog of streets that need maintenance: 55.7 percent of the streets in Asheville are ‘poor’ or ‘very poor,’” Council member Gordon Smith noted. “This would certainly address that in some fashion.”

“Unless the Powell Bill goes away,” Bothwell noted.

“Yes, that is the big concern,” Whitehorn said.

“Relative to other cities in North Carolina, it’s pretty bad,” she added later of the city’s street conditions. As resurfacing costs about $400,000 a mile (“it’s incredibly expensive,” as Whitehorn put it) and the city only resurfaces about two-and-a-half miles a year right now, she broached the city take the $800,000 from the vehicle fee hike and use it to leverage $16.7 million in loans to resurface streets on a more ambitious scale.

Mayor Esther Manheimer also noted that the stormwater hikes came as part of a larger plan to better protect the city from landslides, “because we’re terribly underfunded” and that Asheville’s fees were still lower than many other cities around the country.

“Ours is very reasonable, and it will continue to be very reasonable,” she asserted.

The city is also looking at the increases of the transit management contract and changes to the bus system. Due to a conflict between state and federal labor law, the city has to hire an outside management company to manage the local bus system. Last year the transit workers union and rider advocates raised major concerns about the management of First Transit, the company currently in that role, asserting that the corporation had major problems with transparency and safety issues and that city staff had failed to act when concerns were brought forward in 2014, instead opting to renew First Transit’s contract again.

Afterwards, Council agreed to open up the contract for bid rather than give First Transit another year. The new contract will include funds for additional monitoring and personnel in an effort to address concerns about the state of the system.

At the same time transit advocates have also demanded evening service (something controversially cut in 2012 when the transit system was overhauled), asserting that its loss cost some working class Ashevillians who rely on the bus system their jobs.

Bothwell asserted that, as the transit system is partly funded by parking fees, it was time to look at increasing those fees to generate more funds from tourists.

Funding the system is a complicated mix of local, state and federal funds, with the grants from other governments being particularly uncertain. Whitehorn noted that the key goals from staff were extending routes in South and West Asheville. They were also considering adding a total of eight hours of additional service, spread over routes with the greatest need, at a cost of

The prioritization of extended routes over later service raised questions from Vice Mayor Gwen Wisler.

“There are some people out in the community who say extended hours are the highest priority, so how did the city get to the S3 bus being a higher priority than extended hours?” Wisler asked. “Because out in the community they’re saying it’s extended hours that’s the highest priority.”

“This is what the transit master plan recommends,” Transportation Planning Manager Mariate Echeverry said. “The next [routes] in line are S3 and S4.”

“It wasn’t just because they’re the next things on the transit master plan, it’s that there are real problems with overcrowding on the S3 and major problems with overcrowding on the S4, and issues with timeliness,” Council member Julie Mayfield, former chair of the city’s Transit Commission, said. “Those are places that need more buses.”

“Especially with the addition of all the apartment units in South Asheville, an increase in service is really critical,” Smith agreed.

Another major topic of discussion concerned trash, specifically city staff’s attempts to raise fees so that the public will pay more, with less needed from city coffers.

This is part of staff’ overall philosophy of “cost recovery,” i.e. trying to charge enough for a service that little or no subsidy from other funds is needed. Depending on the service this can be controversial, as fees aren’t tied to income, for things like trash, access to transit or other amenities they can have a higher impact on lower-income Ashevillians.

Specifically, staff recommended hiking the trash fee from $11.50 a month to $14 after surveying 242 other solid waste services around the state.

“We’re trying to go to what the [statewide] average was last year,” Whitehorn said.

“I’m not a huge fan of the jump here,” Smith replied, preferring that the city move to a “pay as you throw” model that would save money for households that produced relatively little waste while charging higher fees to those that produce more. “The implementation is critical; the period of time it takes for that change in behavior over a broad population requires a strong pilot program and phased implementation. But we should look at analyses so people can adopt that behavior knowing it will make the whole garbage thing more affordable.”

Whitehorn noted that eventually moving to that system was a goal, as was reducing the amount of subsidy (and thus gradually increasing the fees people paid) needed for trash collection. Mayor Esther Manheimer asked Whitehorn exactly how high a fee the city would have to charge Ashevillians to completely pay for trash collection. The answer was $22 a month.

Affordable housing also came up as a budget priority, as city government’s labelled the issue a crisis over the past half-decade as already-high costs skyrocketed, putting Asheville on national lists for its lack of affordability. The city currently has the most expensive housing in the state.

While Asheville has an affordable housing trust fund (currently at about $750,000 a year) to help back developers (usually non-profits) building affordable housing, the situation continues to worsen and that’s left city officials looking for new options. City estimates from last September put the need at 2800 affordable units needed over the next seven years for the situation not to worsen any further.

That, Whitehorn said, would need about $16 million, assuming the city could get affordable housing units built for its average $11,000 per unit subsidy. Community grants and city infrastructure funds could get the city $11.5 million of that, Whitehorn said.

The Housing Authority of the City of Asheville, the agency in charge of public housing in the area, is already asking for up to $4.2 million in housing funds to support its overhaul of Lee Walker Heights, with another $2 million for possible expansion. Some of that would come from federal and community grants, and the city could tie further loans to its annual federal grant funds, staff estimated about $400,000 could come from the city’s affordable housing trust fund.

But moving beyond that, Whitehorn and Council discussed an option that’s so far been off the table for funding the city’s priorities: a bond referendum.

In the early 2010s, Council members had discussed such a bond to deal with the city’s infrastructure. But it never materialized and by 2014 Manheimer asserted such an option was off the table in favor of partnerships with private groups and seeking grant funds to focus on specific districts that could boost city revenue that could then be turned around to improving overall conditions.

But now, given the housing crisis, Council was once again mulling a bond referendum.

“It’s the least expensive debt due to our AAA rating,” Whitehorn said. “But it does require extensive preparation, voter education and outreach.”

The last successful bond referendum in Asheville, dedicated to improving the school system, was in 1986.

“This is a big shift: we’re essentially saying to the community ‘we think this is a great idea, here’s what it’s about, you get to decide,’” she continued. “Which is great, but it requires a lot of preparation.”

Manheimer asked if Whitehorn had seen other cities pursue a similar approach. She noted that Charlotte had done so for specific projects, and that a city could designate the bond for affordable housing in general or for a particular initiative, though it couldn’t be used to fund basic city operations.

“It’s a very common model to have a debt referendum” many years, Whitehorn noted, and in North Carolina it had to be in November of an even election year. So Asheville couldn’t do one before November 2018.

“It’s a big opportunity, a big challenge, but I think it’s certainly worth talking about,” Whitehorn continued.

“This is the one area where we describe the issue as a crisis,” Smith said. “The future of diversity in our community depends on the success of our meeting those affordable housing goals. I feel like we’re at a critical decision point regarding whether we’re going to choose diversity, whether we’re going to be a city where working people can make it. That decision is happening right now, it’s right in front of us.”

Of all the areas the city was discussing, Smith continued that “affordable housing is going to have the greatest impact for the people that currently live here as well as the long-term future of our community. This is a major cultural decision we’re going to make.”

Indeed, to conclude the presentation Whitehorn mentioned two other major expenditures the city might need to turn its attention towards: $750,000 for a new fire station and about the same amount for a 24/7 downtown police unit. That wasn’t all: the Thomas Wolfe Auditorium, built in 1939, was an old enough facility that some shows couldn’t perform at all, and a renovation would take $25-52 million.

“Obviously, that’s a really huge number.”

Check up

As Council made their way from the budget hearing to their chambers, the focus turned to an ongoing, vexing problem.

One of the major political controversies of last year (and very possibly this year as well was what to do about Airbnb and its ilk. With Asheville exploding as a tourism destination,

The issue raised concerns about kicked-out renters (as a property can make more renting to tourists than locals), the extent of property rights and the effects on neighborhoods and whether the profusion of homes rented as “short-term rentals” on Airbnb and similar sites further worsened the city’s already-dire housing situation.

Last year, Council attempted a two-pronged approach. Concerned about affordable housing issues and pressure from anti-Airbnb property owners who claimed the influx of tourists was hurting their neighborhood, Council strengthened the city’s existing ban on renting out whole homes to tourists in residential areas with a increased fines and stepped-up enforcement. At a later meeting, Council also approved rules allowing for easier use of “homestays,” or locals to rent out part of homes they were living in to vacationers. That was an attempt to address concerns from some STR advocates that some cash-strapped homeowners found Airbnb a useful way to make some extra cash.

March 22 saw the city get an update on how the aforementioned enforcement was going. Bothwell, who’s been critical of the city’s ban on short-term rentals, asked staff what the nature of the violations were.

“They were all basically operating a short-term rental without a permit, operating the whole home,” Shannon Morgan, the city’s enforcement officer for its STR rules, told Council.

“I assumed that after the previous Council adopted the changes homestay rules, there would be a flood of applications of people trying to come into compliance with those new requirements, but it doesn’t seem like that’s actually happened,” Mayfield noted.

“To date we’ve had 52 applications, approved 46 and we have a few that are pending final site exceptions,” Jason Nortz, the city’s assistant director of Development Services, said. “I think there are a good number of properties out there that are still operating as illegal short-term rentals. We recognize that we have a lot of work to do when it comes to enforcing those, especially proactively.”

But, he added, the program was only four months old, and staff would be back in four more months to give a fuller idea of its effectiveness.

“The thing I’m curious about is if this lack of applications predominantly reflects that people are going ahead and operating illegally or reflects the fact that there aren’t as many as we thought there were in teh first place,” Bothwell wondered.

“It’s hard to say, probably a little of both,” Nortz said.

Some applicants for homestay permits were also lying about actually living in the house, Morgan noted. The permits are intended to let people rent out room in their primary residence, and requires that they’re there while their visitors are).

Such applicants would submit all the documentation, assure the city they were living there, but “we’re getting concerns from neighbors that those people are not there, and we are working on a process to deal with that.”

“So they’re whole home rentals trying to masquerade as a homestay?”

“Exactly,” Morgan replied.

But in the open public comment session at the end of the meeting, Jane Mathews, a former member of the city’s planning commission and opponent of short-term rentals, warned that she felt enforcement was lacking.

“The report provided to you tonight lacks detailed information on enforcement, it notes that 17 complaints were filed, but not the results of those complaints,” and it by focusing on homestays it didn’t note the number of whole-home short-term rentals the city had shut down, she added.

“My opinion is that the city is still putting enforcement on the backs of the citizens, using primarily if not exclusively complaint-based enforcement “Staff have told me personally that it’s hard for them to identify illegal STR operations using the web. I’m here tonight to prove to you that is absolutely not true.”

“In less than one hour on the internet yesterday I was able to find a local website that has specific street addresses listed for what appear to be eight whole-house short-term rentals within the city of Asheville,” Mathews continued, and Morgan had confirmed that none of the properties had a homestay permit. “This person boasts of the fact that this most recent listing is a ‘new rental for us, and had long-term tenants for the past six years. With a community in need of housing of all types and at all economic levels, there is clear indication that properties are being taken off the market. This policy is catering to tourists, not the citizens of Asheville and is contributing to the lost of housing affordability.”

She also agreed with staff that some homestay operators were misrepresenting themselves as residents in order to rent out whole homes using the homestay permit as a cover. The answer, she said, was to more strictly limit the number and distribution of homestays throughout the city.

“Amen,” Smith agreed.

Pound for pound

Then it was back to the fee hikes Council had discussed earlier that day. Up at the podium, Whitehorn asserted that the purpose of the fee changes was to move forward with the city’s existing plans, like making users pay more to use facilities like the Aston Park tennis courts, upping the trash fee and more.

Smith once again brought up “pay as you throw” and the trash hike.

“For me to be supportive of this increase, I’m going to need to be confident that we’re going to move ahead with ways for people to be able to decrease their fees for solid waste,” he said.

“The increase has two different purposes: one is that right now the taxpayers are significantly subsidizing solid waste production,” Whitehorn replied. “That means that right now people who are not residential, like multifamily or large commercial, their taxes are helping to subsidize the user fee and they don’t get the fee. So we’re trying to move to where users are paying for the service.”

She added that the goal with “pay as you throw” was to encourage recycling and waste reduction, “so if we have a fee that’s at an appropriate level when you go to that program ideally the people who recycle the most would save money.”

But, she said, “we don’t know if we can make that work.”

Bothwell said the water fee changes were fair, as they were part of an ongoing process of reducing the burden on residents and increasing it on larger, commercial water users.

“Like any user fee, we want people using the service or the product to be paying their portion, not theirs or someone else’s,” Whitehorn said.

Mayfield noted that the city still had the option to implement “pay as you throw” later in the year.

Smith, while critical of the trash fee, praised the vehicle fee hike for increasing the funds the city could use to improve its aging streets. Bothwell added that would decrease wear and tear on local’s vehicles.

“This is partly an insurance policy should the general assembly decide to further hamstring cities’ abilities to do things,” Smith added of the vehicle fee hike.

The fee changes weren’t entirely over yet, as Whitehorn also noted that changes to the fees charged to developers might change soon as well. Jackson added that a fee hike for bus riders would also come up for later consideration. Both Smith and Council member Keith Young have expressed skepticism about the need for such a hike in the past.

No member of the public commented on the increases. The fee hikes passed 6-1, with Smith against due to his concerns about the trash fee.

Park it

As Asheville’s population and notoriety have increased, so have parking issues on Haywood Road in West Asheville. The city commissioned a study on exactly how bad the situation was and what some possible solutions might be.

Consultant Fred Burchette, who conducted the study, found over 3,000 parking spaces in the area, 720 on-street and 178 on Haywood Road itself. In the area, about 40 percent of the spaces were occupied in peak times (Thursday or Saturday), but most of those were on side streets. But on Haywood itself, parking was 70 to 80 percent occupied during peak times, and 90 percent of spaces on side roads were occupied during weekdays. Given increased development, “we project we’re going to need an additional 180 spaces.”

Burchette recommended the city craft shared parking agreements with entities like the nearby Ingle’s and churches that had extra spaces, along with locals-only passes for people parking on-street near their homes, stepped-up enforcement of existing parking time limits and metered parking along Haywood Road.

But additional spaces or those shared agreement would take money, Burchette added.

“It’s a great report, I didn’t expect to enjoy it as much as I did, that probably says more about me than the report,” Smith said. As someone who lives near Haywood and has a business on the road itself, “it’s been obvious for some time that it’s time for a change in the way we do parking on Haywood Road.”

Side streets, he continued, were crowded due to tourists parking and “residents not being able to park in front of their homes” was becoming a real concern. With Asheville’s increased development, he said, the city had an obligation to try to keep nearby neighborhoods livable.

Wisler also praised the study, but said the city should look at charging for lots along Haywood Road. She also wanted to know about the timeline and costs for rolling the program out.

About a decade, Transportation Director Ken Putnam replied.

“We would try to start plugging in some of these recommendations in 2018 and take 2017 to fully vet some of these recommendations,” he told Council.

Bothwell asked Burchette about the effect of companies like Uber and Lyft, and he admitted those effects were hard to account for.

“The world’s going to look very different in 20 years,” he replied. “I don’t really know how to factor that in.”

Mayfield asked if the city could obtain the abandoned gas station near the Ingle’s and convert it into parking, but Burchette said it would be far too expensive for the potential gains.

Wisler noted that she was concerned about the potential costs of the parking recommendations, especially for the parking agreements and for stepped-up enforcement.

Council unanimously accepted the report, meaning it gave staff the go-ahead to start incorporating the ideas into future planning, though the individual recommendations will need separate, future votes from Council. However, Smith also had concerns about the pace of the changes proposed by staff.

“While I appreciate the deliberate timetable you’ve laid out, it’s a real problem right now,” Smith said.

“I feel like we don’t want to delay it if people are hurting right now,” Manheimer added.

“I agree, but our capacity is limited: we want to do it right, we don’t want to rush it,” Putnam replied.

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