2023-03-08 Durham City Council Budget Retreat Day 1

The Durham City Council held its first day of a two-day budget retreat on March 8, 2023, at the Department of Water Management. The retreat focused on financial projections, recruitment and retention, the half-penny green infrastructure program, capital improvement planning, debt modeling, and council budget requests. Key outcomes included a consensus to explore an infrastructure bond and a planned follow-up special meeting.

Consent Calendar

• No items were considered under a consent calendar.

Public Comments & Testimony

• No formal public comments were taken.

Discussion Items

Opening Remarks & Budget Theme

• City Manager Wanda Page opened with a "don't put all your eggs in one basket" theme, describing various city funding baskets (property/sales tax, fund balance, CIP, federal grants, etc.) and emphasizing the need for smart fiscal choices.

Financial Projections & Budget Outlook

• Budget Director John Ward presented the FY24 outlook: a projected $6.1 million deficit (considered manageable), $30 million fund balance surplus, conservative revenue estimates (property tax growth ~3%, sales tax projected at 5%), and $44 million in council budget requests. He noted the city had received 109 department requests totaling $25 million and 25 council requests totaling $44 million.
• The multi-year general fund forecast showed growing deficits, driven largely by employee pay and benefits.

Recruitment & Retention

• HR Director Robin Wynn presented challenges from the "Great Resignation": 559 vacancies (19% vacancy rate), 15.9% turnover in FY22, and difficulty competing with private-sector wages and remote work. She cited a regional survey where 72% of managers cited wages as a barrier.
• Council members discussed strategies: raising the minimum livable wage, signing bonuses, internships, adjusting credential requirements, and improving employee retention via 360 evaluations and housing support.

Half-Penny for Green Infrastructure (EGI) Update

• Deputy City Manager Bertha Johnson and team shared community engagement results from August–December 2022 in nine neighborhoods. Top priorities from residents: transportation safety/traffic calming (43%), enhanced green spaces (32%), pedestrian safety/access (20%), and sidewalks (5%).
• Presenters outlined potential projects costing $5.4 million for parks, $4.8 million for sidewalks, and $15.1 million for street pavement, with additional needs for traffic calming and bus stop improvements.
• Council members emphasized the need to avoid duplication with existing CIP and to ensure clear communication about what the city can and cannot fund (e.g., DHA property issues).

Capital Improvement Plan & Debt Model

• Budget Director Ward and Finance Director Tim Flora reviewed the CIP process: $99 million in general fund project requests (up from $52 million last year), including $20 million for street repair and $10 million for sidewalks.
• Debt capacity: 11.5 cents for general CIP plus 0.5 cent for EGI, generating about $46 million annually. Outstanding debt was $662.8 million as of FY22 (excluding $95 million housing bonds not yet issued).
• A new debt model will allow real-time scenario testing. The target is a 10% pay-go, 90% debt financing ratio.

General Obligation Bond Discussion

• Council members discussed timing and scope of a potential infrastructure bond. Options included November 2023 (municipal election year), March 2024 primary, or November 2024 general election.
• Council expressed interest in a bond package that could include infrastructure, parks, affordable housing (potentially a second housing bond), and green energy. Many preferred a 2024 timeline to allow adequate public education and staff capacity.

The conversation also touched on alternative revenue sources (sales tax growth, economic development) and the relationship between bonds and immediate needs.

Council Budget Requests Review

• Facilitated by Triangle J staff, the council reviewed 25 requests totaling $44 million using a red/yellow/green card system. Most items landed in yellow (needing more discussion).
• Notable requests: $750,000 for employee bonuses, $230,000 for a youth mentoring portal, $1 million for guaranteed income expansion, $10 million for an AI (African American) community investment, and $88,000 for a convention center feasibility study.
• No final decisions were made; council agreed to hold a special meeting to continue the discussion.

Key Outcomes

• Council directed staff to refine project costing and prioritize among competing requests.
• Consensus emerged to pursue an infrastructure bond, with timing likely in 2024 to allow robust community engagement.
• A special council meeting was scheduled to further deliberate the $44 million in council requests.
• The assumed no tax increase baseline (55.77 cents per $100 valuation) was reaffirmed, though future debt service could require adjustments.