FY27 Budget Work Session - March 30, 2026

The Wilmington City Council held a budget work session on March 30, 2026, to discuss the FY27 budget. City Manager Becky Hawke presented a detailed overview of revenue challenges, expenditure pressures, organizational realignment, workforce retention issues, capital improvement funding, and potential tax adjustment options. No formal votes were taken; the session was informational to guide staff in refining the budget before the official presentation on May 5, 2026.

Discussion Items

• Budget Development Schedule: Hawke outlined the timeline: official budget presentation on May 5, 2026; public hearing on May 19; adoption expected June 2 or 16. The city must adopt a budget by June 30.

• Natural Revenue Growth vs. Ongoing Costs: Hawke explained that Wilmington's natural revenue growth (historically averaging 2% per year) is not keeping pace with rising costs, including wage pressures, healthcare cost escalations, state-mandated retirement contributions, and contractual inflation. For FY27, the natural growth in property tax revenue is projected at only 0.79% due to revaluation appeals. Sales tax growth is projected at 2.5%, a modest estimate given economic uncertainty and international conditions.

• Property Tax Appeals Impact: As of the meeting, 2,548 parcels had filed appeals totaling $7.9 billion in valuation, with an additional 69 parcels in the municipal service district ($682 million). The resulting value loss after appeals is about $1.9 billion, significantly reducing expected revenue. Hawke noted that the county's appeal loss projection may have underestimated the actual impact, and the appeal process continues through May.

• Revenue Outlook Summary: Property tax performance is below expectations due to appeals. Sales tax growth is moderated by external factors. The city has historically underutilized revenue capacity during reappraisal years, leaving potential tax levy untapped.

• Organizational Realignment and Efficiencies: Hawke reported a net reduction of 25.19 FTEs in the FY27 budget compared to FY26 through realignment. Further savings from attrition are expected. The realignment aims to streamline workflows, reduce duplication, and improve service delivery. Councilmember Lyle expressed concern about eliminating administrative assistant positions while adding manager roles; Hawke clarified that new managers are working managers, not exclusively supervisory.

• Workforce Vacancy and Retention Challenges: Citywide vacancy rate is 12.4%; police and fire vacancy rate is 20.8%, considered a critical staffing gap. Currently, 138 employees (13%) earn below 60% of Area Median Income (AMI), and 517 employees (51%) earn below 80% AMI. The proposed living wage adjustment would bring 100% of employees to at least 60% AMI (up from 85%) and 74% to 80% AMI (up from 47%). First responders (65% of workforce, 746 FTEs) would see an average pay increase of 19.3%. Hawke warned of service degradation without intervention, particularly in police and fire. Mayor Saffo noted that service degradation affects core services like public safety and trash collection.

• Major Cost Drivers – General Fund: Total cost pressures amount to $20.92 million, including $14.2 million for employee compensation (living wage), $774,000 for state-mandated retirement contributions, $3.5 million for health insurance (keeping benefits flat; city likely to change providers to improve customer service but absorb the full cost increase), $516,000 for WAVE Transit (base increase to meet current service levels), $535,000 for utility rate increases, and $1.4 million for other items (insurance premiums, IT/fleet replacement, contracts). Department requests add $2.93 million: a cybersecurity officer ($147,000), IT support for public safety ($184,000), deferred core operating needs ($499,000, including ballistic vest upgrades and fleet parts), fire and police safety equipment ($1.6 million), and repair/maintenance ($500,000).

• Capital Improvement Program Update: The staff-recommended CIP funding scenario is 0.51 cents per $100 valuation (down from 0.61 cents previously discussed), totaling $50.2 million, including a $13.3 million grant for bulkhead projects. The total funding gap including CIP is $22.1 million, equating to 6.26 cents total tax adjustment if all items are funded. Hawke stressed she is not recommending that full amount but presented it for discussion. She stated she does not see a scenario without a tax increase in FY27.

• New Park Acquisition: The city contributed $1 million toward a $9.75 million purchase of 25 acres for a park in a park-deficient area, in partnership with New Hanover County and the New Hanover Community Endowment. The county will not contribute to construction or maintenance; the city is the sole owner. Construction is targeted for FY30–FY34. A year-long community input process will begin.

• Tax Adjustment Options and Property Owner Impact: Hawke presented tax rate scenarios based on the median single-family home value of $445,000. A 6.26-cent increase would mean $279/year ($23/month) for that homeowner; 6 cents = $267/year ($22/month); 5 cents = $223/year ($19/month); 4 cents = $179/year ($15/month). For a $250,000 home, 6.26 cents = $157/year ($13/month); 4 cents = $100/year ($8/month). For an $800,000 home, 6.26 cents = $501/year ($42/month); 4 cents = $320/year ($27/month). She indicated that a 4-cent increase would allow only about 40% of the living wage implementation, and anything below 4 cents would further reduce it.

• Golf Fund Enterprise Status: Hawke suggested that the municipal golf fund should operate as a true enterprise fund, fully self-sustaining. The general fund currently transfers $200,000 annually to support the golf course. Director of Parks and Recreation Amy Beatty noted the average greens fee is $49. A $2 greens fee increase and $2 punch card increase are proposed for FY27 to balance the golf fund budget, but that would not address the $200,000 transfer. Rates have been raised six times in ten years. The golf course has approximately 60,000 rounds annually and remains one of the cheapest in the area.

• Councilmember Comments and Questions: Mayor Saffo expressed strong concern about the magnitude of the proposed tax increase (6.26 cents), the highest he can recall, and emphasized the burden on residents, especially low-income homeowners. He suggested a phased implementation of the living wage. Councilmember Santaguida asked for details on phased implementation and the compression effects of the living wage. Councilmember Andrews requested data on staff living within city limits (later reported as 28% of 302 staff). Councilmember Spears questioned the cybersecurity officer position and the potential savings from hiring certified police officers versus new recruits. Councilmember Joyner requested information on tax abatement programs for low-income homeowners. Councilmember Clinton-Quintana supported pursuing alternative funding sources beyond property taxes. Councilmember Lyle questioned the organizational realignment, particularly the loss of administrative positions.

Key Outcomes

• No formal votes or decisions were made. The work session was informational to guide budget refinement.
• City Manager Hawke will continue evaluating budget proposals, incorporate realignment efficiencies, refine the tax adjustment based on council feedback, update revenue projections, and present a balanced budget on May 5, 2026.
• Council indicated openness to a phased approach to the living wage (e.g., implementing 40% in FY27 and completing it in FY28) rather than full implementation in one year. Staff will provide detailed scenarios.
• Staff will provide council with salary data to illustrate the compression effects of the living wage proposal, including current pay and proposed pay for all employees.
• Information on property tax relief programs for low-income residents (county-administered) will be circulated to council.
• The golf fund will be reviewed for potential self-sufficiency; a $2 fee increase is expected, and the $200,000 general fund transfer may be discontinued if council approves in future discussions.
• CIP funding at 0.51 cents (including park design) remains the staff recommendation.
• Staff will continue to pursue grant funding for bulkheads (over 100 letters of support received) and other capital projects.
• The county will be asked to provide a 10-year history of how much of the assessed value growth is attributable to new development.
• A list of new job descriptions will be uploaded to the city website for council review.