If budgets are a value statement, then Durham City Manager Bo Ferguson spent Monday night signaling that the next year’s budget values preservation.
Firefighters and tennis enthusiasts with rackets in hand, alongside a handful of other residents, filled the audience at City Hall as Ferguson laid out his proposed budget, which would raise the minimum wage for city employees while staving off an increase in property taxes. But those choices came with tradeoffs. Employees would not receive merit pay increases, and nearly $1 million in funding for local area nonprofits and organizations would be cut.
The city of Durham faces significant financial challenges—some anticipated, others unforeseen—which Ferguson said put unusual pressure on the budget proposal.
“In a year like this, our responsibility is to practice careful stewardship, to protect core services, to care for our workforce, and to invest where our residents need it most,” Ferguson said.
Similar to Durham County, the city is reckoning with less incoming property tax revenue than staff projected. Nearly 10,000 tax appraisals were successfully appealed by property owners in the last year, including several large commercial properties, shrinking the total value of taxable property—the main source of the city’s revenue—by $2.6 billion. The city not only raised less money than anticipated, but actually refunded about $9 million in property taxes, putting the budget at an unexpected deficit and staff on their heels.
“It is important to underscore that this is a one-time correction related to the unique timing and nature of these appeals,” Ferguson said. “We expect revenue growth to return in future years as these corrections work their way into the system.”
The projected total for the upcoming fiscal year budget is $766 million, up $44 million from last year, though the city’s General Fund, which supports most essential services, would be reduced by roughly $500,000. The current tax rate—43.71 cents per $100 assessed value—would remain the same, despite unexpected revenue shortfalls. (Durham County proposed a 2 cent tax raise.) Ferguson said keeping the tax rate at its current level was a high priority for city council during early budget discussions.
“Even in a challenging year, we have made careful choices so we can maintain essential services, continue progress on our top priorities, and be transparent about the trade-offs required to do so,” Ferguson said.
One of those top priorities is employee wages. At a budget retreat in February, city finance staff forecasted a pressure on the budget they did anticipate: To keep up with the 2019 Durham Minimum Livable Wage ordinance—which ties pay to housing costs—the city would need to increase base wages from $21.90 to $25.09 per hour, a per-year increase roughly four times higher than normal.
To cover the wage increase, the proposed budget includes an additional $8.4 million for employee compensation, which not only raises the wage floor, but increases pay throughout city staff by 2% to help avoid wage compression. Merit increases—awarded for performance—were not included as part of the pay increase, but Ferguson said the city is funding a new classification and compensation study in the coming year to “ensure our pay structure remains sustainable and in line with the market.”
The city’s firefighters, dozens of whom sat directly in front of the manager during his presentation at city hall, were not completely satisfied with the proposal.
Firefighters are on step plans; fixed compensation structures in which employees rise through predetermined pay levels (steps). Step plans offer employees, typically in the public sector, a certain predictability; they know what they will earn at each level, and when they are eligible for the next one.
During the early days of the COVID-19 pandemic, certain steps were temporarily put on hold due to the then-unknown impact the pandemic might have on the city’s budget. Firefighters and other city employees on the step plan have been fighting for the last few years to be brought up to where they would be if not for the pandemic-era pause and make up for the lost opportunity to climb the step ladder.
“Our promised raises were stripped after all the hard work the members have put in this past fiscal year,” the Local 668 firefighters posted on Facebook.` “This has happened time and time again when budget cuts occur. We have no doubts that providing a balanced budget is no simple feat, but denying merit raises to all the employees that keep Durham running everyday is unacceptable.”
The fire department has the city’s second-highest number of full-time employees, behind only the police department, and the fourth-highest budget appropriations at the city, behind transportation, water management, and police at number one.
In February, city council members and the city’s budget staff lamented the lack of clarity around federal and state funding during their two budget retreats. Those conditions have persisted, with inflation and gas prices still rising causing ripple effects throughout nearly every industry and way of life. The state only recently proposed its own budget after almost three years of delays, which have downstream effects on local municipalities like the city of Durham.
Still, the proposed budget manages to make meaningful investments in supporting Durham’s most vulnerable residents. The city committed $4.55 million in federal and ARPA funds to a new Strategic Framework to Prevent and End Homelessness, targeting a 30% reduction in unsheltered homelessness and 50% reduction in youth homelessness within the first year as part of a $13 million community-wide effort. The budget also includes $750,000 for Eviction Diversion and $100,000 for Emergency Home Repairs
In addition, GoDurham buses would remain fare-free for another year. “However,” the budget proposal warns, “the long-term sustainability of fare-free transit will require serious discussions among all funding partners in the future.”
The budget also includes $3 million for athletic court improvements, falling short of the $7 million ask from Durham Parks and Recreation on behalf of a vocal tennis community, but is still a welcomed investment, the players said.
“Just having any kind of money to make repairs makes a big difference,” said Amanda Laird, an active Eno Community Tennis Association player, after the presentation. “I mean, we’re such a big community, it would help.”
The city’s presentation comes a week after Durham County Manager Claudia Hager presented her own budget before the county board, carrying a similarly tepid tone and emphasizing the impact of the lost revenue from tax revaluations.
The next budget public hearing for the city of Durham will be held on June 1. The city council makes its final vote on the budget on June 15.
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