Council, Mayor Speak On Fiscal Constraints

The meeting was held after Gov. Mike Easley's Feb. 5 announcement that he will withhold more than $1 million in tax revenue from the town because of North Carolina's $900 million budget shortfall this fiscal year.

The town meeting was an opportunity for the boards and committees involved in transportation, libraries, sidewalks and housing to comment on the new budget constraints.

Mayor Kevin Foy also told fellow council members about his meeting with Easley, which was held earlier that day.

Most of the work session centered on the need for cost-cutting creativity, though the council will not make any formal decisions until June, when the fiscal year ends.

One idea proposed by the council is the creation of a position within the Bicycle and Pedestrian Advisory Committee that would be devoted to pursuing grants from outside sources.

A second idea that emerged from the discussion was the possibility of passing costs such as sidewalk construction on to private developers and homeowners.

After the various boards commented on the proposed budget changes, Foy spoke informally about his meeting with Easley earlier in the afternoon.

Foy and 15 other mayors met with Easley in Raleigh to discuss North Carolina's budget and the relationship between municipal governments and the state.

"We can't tolerate this kind of unpredictability," Foy said, referring to Easley's new cuts. "We have to have absolute security about revenue sources -- and that means more authority at the local level."

Foy said he is particularly frustrated with the governor's decision to withhold utility franchise tax revenues from local governments, and council member Mark Kleinschmidt asked if Easley's move was illegal.

Town attorney Ralph Karpinos, who did not attend the meeting, said of the action: "I think it's a question that's not clearly answered in the law."

Revenue generated by the utility franchise tax, which taxes services like cable television, goes to the state and is intended to be redistributed to local governments. "That's why it's not state funds," Foy continued. "It's our funds, and (Easley) is keeping it."

The tax is the third highest source of revenue for municipalities in the state, and it will cause an estimated budget shortfall of $3 million during the next year and a half if it continues to be withheld.

"It sounds like a small business hiring a collection agency to handle their money -- and the collection agency keeps the money," said council member Bill Strom.

Foy mailed a letter to Easley on Feb. 13 formally protesting the state's action.

During the town's meeting, Foy said Chapel Hill has been fiscally responsible in maintaining a reserve fund for unexpected costs -- a fund that he doesn't want the state to touch. "The state is looking at these (reserves) like the wolf looks at Little Red Riding Hood."

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