Fayetteville leaders weigh a recommended tax increase to fund public safety, homelessness response and stalled capital projects

City Manager Jeff Yates presented a recommended FY27 budget that staff say could be balanced without raising the property tax rate, but that includes a three‑cent package to speed up sidewalks, paving, capital maintenance and investments in public safety and the Office of Community Safety (OCS).

"The budget can be balanced to zero cent tax increase," Yates told the council, adding that "the recommended budget" is intended to allow the city to "do more or do more quicker" than maintenance‑only spending would permit. Yates said the recommended package includes recurring pay and step adjustments, a 1% employer match for deferred compensation to finish a parity plan with sworn officers, and $0.03 of tax rate to support operating and capital additions.

Councilmembers pressed for concrete tradeoffs and asked staff to produce a short list of items that would be cut at a zero‑increase scenario. Councilmember Hondros asked the council to identify both additions and deletions, and to return for a follow‑up session so the body could agree what to keep and what to remove. Hondros also moved to schedule a follow‑up meeting one week out; the motion was seconded and approved.

Why the increase? Yates and other staff emphasized that much of the three‑cent request is meant to finish projects and commitments rather than to preserve a status quo the city already finds strained. The presentation showed community‑safety operations rising from roughly $92 million in 2022 to a recommended ~$120 million in FY27 — a 31% increase in that category alone — while ad valorem and sales tax revenues had not kept pace. Yates told the council the gap has been covered with a range of balancing tools, including $1.2 million of one‑time fund balance, an estimated $8.9 million vacancy savings assumption and about $1.5 million of closed CIP re‑allocations.

Councilmembers asked for granular detail. Several members sought a clear accounting of the $8.9 million vacancy assumption and asked how much of that saving is already built into departmental budgets versus a year‑end unallocated cushion. Yates replied that the $8.9 million is a vacancy‑savings estimate used on the expenditure side to offset costs, not a free reserve to spend without council appropriation. He warned that if public‑safety vacancies fall (departments fill positions), the vacancy savings will shrink and the structural pressure on future budgets will increase.

Homelessness and OCS. District engagement exercises, staff said, repeatedly ranked homelessness and mental‑health responses among top resident priorities. Councilmembers debated whether Fayetteville should expand shelter capacity directly or fund nonprofit partners and day‑resource centers. Staff defended a phased OCS build‑out, saying an FY27 recommendation of about $2.1–$2.4 million represented a true‑up from placeholder figures and was sized to be spendable and sustainable in the coming year. Councilmember McMillan urged caution but said that investment in homelessness and prevention aligns with resident input and long‑term crime reduction goals.

Capital projects and closed‑CIP money. Yates detailed how staff had combed the CIP for closed or delayed projects and reallocated roughly $1.2 million for higher‑priority needs; that process produced a list of 'parking lot' items that council will consider for funding or deferral. Council asked staff to produce a clearer list showing which closed projects freed funds and where those dollars would be reassigned, and sought updated cost estimates for projects such as the Blue Street senior center renovations (staff signaled estimates had moved from about $650K to nearer $850K).

Compensation. Staff recommended a recurring compensation package that combines honoring step plans for eligible employees, a 4% midpoint adjustment for other employees and a 1% employer contribution to deferred compensation, a package Yates estimated at roughly $4.9 million recurring. Council asked staff to model alternatives — including a 2.5% increase plus a one‑time $1,500 payment for non‑step employees — and to return with the dollar impacts prior to a final decision.

Next steps. Council collected a set of parking‑lot follow‑ups — more detailed CIP tables, clarity on fund‑balance timing and encumbrances, firm numbers for the Blue Street proposal, and a breakdown of the one‑time versus ongoing tradeoffs — and scheduled another dedicated work session to resolve outstanding choices before adoption. The manager and staff said they will supply the requested line‑by‑line data and updated cost comparisons for compensation and OCS phase‑ins.

What remains unsettled: whether to accept the recommended tax package in full, which CIP projects to defer or reallocate, and the pace at which the city will staff OCS and public‑safety positions without creating unspendable encumbrances. The council asked for clear, short memos that show the direct service impacts of a zero‑increase scenario versus the recommended three‑cent package. The follow‑up session will give council the opportunity to choose specific additions and deletions before a final vote. Ending: The council adjourned after setting a follow‑up meeting to finalize choices and get staff line‑by‑line figures.