Morganton leaders begin budget planning amid legislature's property tax discussions

As Morganton leaders begin working through next year’s city budget, they are also watching discussions in the North Carolina General Assembly that could limit property tax revenue, one of the few sources of funding the city controls locally.

City staff presented a midyear financial update on Friday, Feb. 27, outlining upcoming capital needs and reviewing progress on Hurricane Helene recovery during their winter budget workshop with the city council.

As of late December 2025, the city had collected more than $17 million in general fund revenues for the current fiscal year and is on track to reach about $31 million, according to Finance Director Jessie Parris. Of the city’s general fund revenues, the largest portion comes from property taxes, expected to be over $13 million.

“It’s how we pay for things at the city. It is less than 30% of our total budget,” Parris said.

City Manager Sally Sandy expressed concerns about the North Carolina General Assembly’s exploration of local property tax limits. In December 2025, Speaker of the North Carolina House of Representatives Destin Hall created a committee to study options to reduce the property tax burden on taxpayers and consider reforms that provide relief, while balancing potential impacts to local government revenues.

The committee recently heard from the Tax Foundation, a Washington, D.C.-based think tank that suggested a cap on how much revenue a municipality could collect from property taxes each year. To override the cap, local governments would need voter approval through a referendum.

To move forward, a recommendation from the committee is expected before the North Carolina General Assembly reconvenes on April 21. Local government budgets are approved in mid-June before the new budget year starts on July 1.

“There’s a lot going on with that right now, and some action will come out of that,” Sandy said. “That is very worrisome because, as you heard Jessie say, the only real revenue, not talking utility, is the only revenue we have local control over.”

“A lot of that started with the jump in valuation from COVID,” Parris added.

The city’s general fund expenses for this fiscal year are expected to be $35 million, which nearly half has been used at $17 million. Public safety has the largest portion of expenses, currently at over $6 million, and expected to be $13 million by the end of the budget year. Parris said spending is currently on track.

Sandy further emphasized the impact property tax limits could have on the department of public safety.

“Across the state, the public safety budgets take anywhere between 45% and 60% of the general fund across the board, and so the talk has been, you’re going to really make some severe impacts to what happens in your localities with that,” Sandy said.

Utilities, including water, wastewater, electric, and CoMPAS, operate as enterprise funds under state law. Combined, they are expected to generate about $57 million in revenue.

“This makes up a large percentage of what the business of the city is,” Parris said. “We’re right in line with where we need to be, and again, just a great testament in our utility billing collection process and the amount of economic downturns and ups and downs we’ve had in our collection process.”

Through the last few years, the city has tapered off its debt service from over $20 million to around $15 million, which has been done purposefully to prepare for large capital expenditures, Parris said.

HURRICANE RECOVERY PROGRESS

The city has made progress toward reimbursement for the 26 Hurricane Helene recovery projects, which total about $42 million in damages.

So far, the city has received more than $5 million in FEMA reimbursement for 17 projects. The recreation maintenance building rebuild project has been obligated, meaning FEMA has committed to funding it. During the council’s budget workshop, staff also received a check for the electric refund, which had been obligated for some time.

There’s still an estimated $32 million worth of projects left to get reimbursement for, according to Assistant City Manager Rob Winkler.

“It’s pretty eye-catching and pretty overwhelming, and it has been for a while,” Winkler said. “The team has worked really hard. And when I say the team, I mean the whole city because this is something that touched everybody.”

The reimbursement process has been slow, and FEMA is currently closed for business due to the Department of Homeland Security shutdown. But once the department is back in business, Sandy said she is hopeful the process will move forward.

There is currently one project in final FEMA review, while five others are in varying stages of engineering.

“Really, what we’ve turned in, ultimately after a bit of arguing and a lot of back and forth in some cases, we’ve been lucky to get funded,” Sandy said.

CLOSING OUT ARPA PROJECTS

The city is nearly finished with its projects funded by American Rescue Plan Act funds allocated from the COVID-19 pandemic. The $4.8 million went toward several community projects such as the new Mountain View Gym floor, paving at Freedom Park, and several park improvements at Carbon City Park, Freedom Park, and the Catawba River Soccer Complex.

All but two projects are complete. The $2.1 million Bost Road sewer improvements will be completed this spring, and ARPA-funded paving is expected to be complete spring, with striping and touch-ups left to be finished.