Wilmington City Council Budget Work Session – March 28, 2025

The Wilmington City Council held a special budget work session on March 28, 2025, to discuss the proposed Fiscal Year 2025-26 budget. Key topics included the city's financial position, opioid settlement funding, stormwater fee adjustments, a parks and recreation cost recovery plan, fire fee updates, civic partnership funding, and other policy matters. Council members provided guidance on several items, including reallocation of motor vehicle license tax revenue, compensation adjustments, and the future of red-light cameras.

Discussion Items

• FY26 Financial Position & Revenue Outlook

  • City Manager Tony Caudle opened by noting that guidance from the January work session was being incorporated. Sales tax numbers were still fresh due to reporting delays.
  • Budget Director Laura Mortell presented that inflation, labor market pressures, and uncertain state/federal policies are straining revenue. The primary revenue source (property tax) has not kept pace with inflation since 2021.
  • Compensation packages require $7–$8.5 million this fiscal year, plus $1.3 million for health insurance (no premium hikes for employees). Departments were asked to identify $3 million in reductions; proposals are under review.
  • Revenue enhancements include shifting back three-fifths of a cent of the property tax rate (over $2.1 million) from debt service to the general fund, using proceeds from imminent property sales and parking fund surpluses.
  • The general fund revenue is estimated at just under $155 million, with a projected shortfall of $500,000 to $1 million.
  • The revenue-neutral tax rate is 27.47 cents; with growth and rounding, the recommended rate is 28.25 cents per $100 valuation. For an average homeowner (value rising from $238,000 to $365,000), this results in an annual increase of about $28.
  • The affordable housing portion was discussed: staff recommended keeping the contribution at $2.3 million (the same as FY25) by reducing the dedicated penny to 0.67 cents due to property value growth. Council members expressed caution about reducing the dedicated penny, but staff noted it still provides the same dollar amount. No final decision was made; current policy (2.5 times fund balance) remains unless changed.
  • Sales tax revenue is projected to grow 3.5% in FY26, though staff acknowledged this is optimistic.

• Motor Vehicle License Tax Reallocation

  • Mr. Caudle reported that the increased vehicle tax intended for the Neighborhood Traffic Management Program has not been spent because two positions remain unfilled. He suggested reallocating the $1.8 million fund elsewhere. Council consensus was to explore options, possibly toward transportation CIP or other uses. Some members expressed frustration that the tax was collected without program implementation.

• Opioid Settlement Funding Update

  • Jennifer Rigby, New Hanover County Chief Strategy Officer, reported that over $36 million in settlement funds will be received over 18 years. City and county funds are combined. A joint elected committee recommends $3.8 million for FY25-26, including expansion of medically assisted treatment at the detention facility and wearable devices. Overdose deaths are decreasing locally due to rapid deployment of resources. Council members praised the program and asked about youth prevention and future manufacturer settlements.

• Stormwater Fee Adjustment

  • Dave Mayes, Public Works Director, outlined the stormwater utility’s financial model. Since inception, 54 projects totaling nearly $60 million have been completed. He recommended a 3.34% rate increase for FY26 (from $8.68 to $8.97 per ERU), to continue through FY34. This is an increase of $0.29 per ERU this year. The City Streets Fee growth rate is being reduced from 2.5% to 0.47% based on actual street mileage growth, saving the general fund over $600,000. The adjustment maintains financial stability and bond ratings. Council members asked about the city’s own payment ($2.1 million) and the impact on future debt sales.

• Parks & Recreation Cost Recovery Plan

  • Amy Beatty, Parks and Recreation Director, presented a cost recovery policy based on a 2024 MGT study. Current cost recovery is 19%; the target is 25% (aspirational 35%). A five-tier methodology was proposed, with fees increasing most in tiers 4 and 5 (individual benefit). Fee increases are modest ($1–$2 for many programs) and projected to generate $100,000 in FY26. A fee assistance program for households below 60% AMI (50% discount) was recommended. Golf course cart fees would increase by $2–$3 to fund a cart barn project. Council members discussed tree mitigation fund balance ($1.256 million) and the potential for relocating trees from development sites.

• Fire Fee Recommendations

  • Assistant Fire Chief Chris Walker presented updates to fire fee schedules, most unchanged since 2009. Fees were recalibrated to align with inflation and comparable departments. Some fees were eliminated (e.g., residential burn permit due to ordinance conflict). Film industry standby fees were discussed; council members suggested reviewing rates to ensure they cover costs without hindering economic development. No formal vote was taken.

• Civic Partnership Program

  • Economic Development Director Aubrey Parsley reviewed the program, which currently funds 10 entities at $228,500 per year. The city received 20 applications requesting $726,500. Recommendations maintain the same aggregate funding, prioritize legacy recipients, minimize program overlap, and align with city strategies (workforce development and tourism). Notable: UNCW Center for Innovation and Entrepreneurship would be wound down over three years ($50,000 to $10,000). Councilmember Spears expressed concern about not funding new applicants due to perceived duplication. Councilmember Andrews suggested a council subcommittee review future applications. Discussion included the possibility of shifting all outside agency funding to the New Hanover Community Endowment, but council members wanted more information before moving forward. No decision was made; the recommendation will be presented in the manager’s proposed budget.

• Other Funding Requests

  • City Manager Caudle noted three requests not included in the manager’s budget unless council directs otherwise: World War II Homefront Heritage Coalition ($221,000), LINC’s L.I.T.E. Community Health Program ($173,000), and YMCA Midtown expansion ($1 million over five years). Council voted to schedule presentations from these groups. Councilmember Andrews added the Alliance for Cape Fear Trees to the list.

• Red-Light Camera Abolition

  • Mr. Caudle announced that the manager’s recommended budget will include ending the red-light camera program when the contract expires at fiscal year-end. Replacement cameras for law enforcement purposes (not enforcement) would be proposed.

• Compensation Adjustments

  • Mr. Caudle confirmed that a robust compensation package will be included in the proposed budget, effective July 1, covering both January and July adjustments. Council expressed continued support for competitive employee pay.

• Capital Improvement Program (CIP) Prioritization

  • Councilmember Waddell and Mayor Saffo advocated for narrowing the CIP to realistic, deliverable projects. Staff will bring forward a prioritization process for the May work session.

Key Outcomes

• Consensus to reallocate motor vehicle license tax funds (approximately $1.8 million) away from the Neighborhood Traffic Management Program, with specific use to be determined.
• Direction to staff to proceed with a compensation package effective July 1, with details in the manager’s budget.
• Recommended fee increases for stormwater (3.34%), parks and recreation (target 25% cost recovery), and fire services were discussed and will be included in the proposed budget for formal adoption.
• No formal votes were taken; the meeting was a work session to guide staff. The city manager’s proposed budget will be presented at the first council meeting in May, with subsequent workshops and public hearings leading to adoption in June.
• Council requested presentations from three outside funding requestors (World War II Homefront Coalition, LINC, YMCA) and the Alliance for Cape Fear Trees.
• Staff directed to prepare a prioritized CIP list and explore process improvements for project delivery.