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With less in sales tax revenue, Fayetteville faced with raising taxes

City trying to cope with a decision by the county to change its revenue-sharing formula


Fayetteville City Manager Douglas Hewett has proposed a new budget for the city, and it includes a hike in property taxes — as much as to 56.95 cents per $100 property evaluation, a 7-cent increase.

Most of that increase is because of bonds passed by Fayetteville voters this past November. But the rest, city officials say, is because Cumberland County changed how it disperses sales tax revenue among municipalities in the county.

Assistant City Manager Jeffrey Yates explained during a budget work session Wednesday how the county’s action affects the city’s bottom line.

Under the previous agreement with the county, Fayetteville received about 36% of the county’s sales tax revenue while the county itself got about 58%. With the new agreement, the county now gets 72% while the city’s portion drops to 25%, a decline of more than 11%, by far the largest reduction among any municipality in Cumberland County.

Because of the loss in revenue, Hewett estimates in his budget proposal that the city will lose $7.8 million in the next fiscal year. And that loss is expected to grow. The city projects with the new agreement with the county, it will lose more than $14 million in fiscal year 2030.

City Council members present at Wednesday’s budget meeting were not pleased with the new tax agreement.

“Staff and those on council at that time, they knew this. We knew this was coming. So where is the contingency plan for it?” council member Deno Hondros asked. “What have we done to mitigate it?”

Hewett said city officials did not anticipate that the county would make the change now.

“The agreement was beneficial to everybody,” Hewett said. “Certainly, you could anticipate this is going to happen because it is an agreement. It had an expiration term. We did not, nor did the council, anticipate that the county would make this change this year. We did not.”

Hewett said members of the council may have made different decisions if they had known beforehand, such as supporting the $97 million in bonds approved by voters.

“Could have, would have. I think that if we had known even months earlier that this was something that they were contemplating changing, the council may have made different decisions,” Hewett said.

Mayor Pro Tem Johnny Dawkins expressed frustration with the county.

“It's called leverage. We have none,” Dawkins said. “They have it all when it comes to this type of agreement.”

Offseting revenue loss

To offset the lost revenue, Hewett factored $19.8 million in the budget that he anticipates in savings because of expected gaps in the city workforce.

“I’ve not budgeted $19.8 million,” Hewett told the City Council last week in his budget presentation. “I know based on historic trends that we’re not going to be fully staffed. I’ve already incorporated that savings into this budget that asked for tax rate increases.”

According to Yates’ presentation on Wednesday, the vacancy rate among city workers has gone up since 2017, when it was 4.5%. After the height of the COVID pandemic, the rate was 7% last year. The city manager has worked into the budget an expected 10% vacancy rate.

That alone, however, won’t meet the $19.8 million mark. The city expects to cut costs elsewhere as well.

“We'll get it through other things too,” Yates said Wednesday. “For instance, we may not buy as many of something or the estimated cost of fuel changes. We may not need the extra set of tires — those kinds of things.”

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Ben Sessoms covers Fayetteville and education for CityView. He can be reached at bsessoms@cityviewnc.com.


Fayetteville, property taxes, tax hike, City Council