Chapel Hill Town Council Work Session on 2025 Revaluation and FY2026 Budget – April 16, 2025

The Chapel Hill Town Council held a work session on April 16, 2025, from 6:00 PM to 9:46 PM at Library Meeting Room B. The session focused on the Orange County 2025 property revaluation and the FY2026 budget development. Council members received data, discussed scenarios, and provided guidance to staff. No formal votes were taken; public comment was scheduled for the April 23, 2025, business meeting.

Orange County 2025 Revaluation Presentation

• Presenters: Nancy Freeman (Tax Administrator) and Chad Phillips (Deputy Tax Assessor), Orange County.
• Chapel Hill’s total tax base is 71.8% residential and 28.2% commercial. Residential values increased by 53.4%, commercial by 30.2%, resulting in an overall increase of 46.1%.
• The revenue-neutral tax rate for Chapel Hill is 44.2 cents per $100 valuation (current rate is 59.2 cents).
• Chapel Hill’s median home value post-revaluation is $692,350.
• As of the meeting, Orange County had received 1,366 total appeals, with 332 from Chapel Hill (290 residential, 42 commercial).
• The county has conducted approximately 10,000 field reviews since the last revaluation, targeting areas with high appeal rates.
• Council members expressed concerns about the disconnect between market-driven price increases and housing affordability, racial/class disparities, and the impact on long-term residents and fixed-income households.
• Staff noted that commercial growth in Chapel Hill historically lags residential growth, and that multifamily housing (apartments) is classified as commercial.

FY2026 Budget Development Update: Data, Scenarios, and Tradeoffs

• Presenters: Interim Town Manager Mary Jane Nirdlinger and Business Management Director Amy Oland.
• The projected budget gap is $6,762,207, driven by a $1.6 million decline in sales tax revenue, higher employee costs ($2,946,237), and rising operating costs.
• Total revenue is estimated at $86,613,138; departmental budgets total $89,335,305.
• Staff presented four main tax scenarios (cents over the 44.2 cent revenue-neutral rate):
  1. Revenue-neutral (44.2 cents) – requires $500,000 in cuts, no pay raise, continues fund balance appropriation.
  2. Revenue-neutral + 2.5 cents (46.7 cents) – includes 3% pay raise, $1 million in cuts, still appropriates fund balance.
  3. Revenue-neutral + 5 cents (49.2 cents) – “base budget” that stops appropriating fund balance, includes 3% pay raise, but departments must absorb inflation.
  4. Revenue-neutral + 8.5 cents (52.7 cents) – “base plus” addressing five-year plan needs.
• A new scenario was introduced: 2.5 cents for the general fund plus 1 cent for transit (total 3.5 cents; 47.7 cents rate) to address fleet, facilities, fire capital, and grant-funded positions.
• The value of one cent on the tax rate increased from $976,000 in FY25 to $1,321,000 in FY26 due to revaluation.
• Staff emphasized that an 8–10% across‑the‑board cut would require eliminating approximately 40 positions and deeply affect services.
• Council members discussed strategies such as discontinuing loose leaf collection (containerization), reviewing outside agency funding, holding NCDOT and private landowners accountable for road maintenance, and implementing a hiring freeze (except public safety).

Key Outcomes

• Council provided guidance for the Manager’s Recommended Budget (to be presented in May 2025):
  • Tax rate: A majority supported a rate between 47.2 cents and 49.2 cents (approximately 3 to 5 cents over revenue-neutral). Several members leaned toward 3–4 cents over neutral; others advocated for 4.5 cents or higher to fully fund core services and avoid service cuts.
  • Priorities: Strong consensus to avoid layoffs, fully equip Police and Fire Departments, fund street repaving, maintain social services, and support staff compensation (though some considered a 3% raise more feasible than the 5% in the pay study).
  • Cuts and savings: Staff will identify $1 million in reductions, including possible changes to leaf collection, reduced training/travel, and reassessment of outside agency funding (e.g., Visitors Bureau, Downtown Partnership).
  • Fund balance: Council agreed to work toward not appropriating fund balance for ongoing expenses, protecting the town’s AAA bond rating.
• No final decision was made; the next steps include public comment on April 23 and a recommended budget in May, with a final vote in June.