JOHNSON CITY, Tenn. (WJHL) — Johnson City employees are set to see 7.5% pay increases and the city’s operating budget is rising almost 9% next fiscal year — all without a tax increase thanks to strong growth and a healthy reserve balance.

City Manager Cathy Ball told News Channel 11 city management looked at the consumer price index, which has shown inflation hovering around 8%, as part of its personnel budgeting process. They also studied pay scales for comparable public sector work and took a hard look at the city’s fairly high job turnover rate.

“It’s taxpayer money and we want to be very careful in how we spend it, but addressing employee compensation is a really a high issue,” Ball said. “But we have to evaluate all the needs that come forward next year to see if that’s sustainable, and we will be monitoring it all the time.”

The city’s fiscal 2023 budget, for the year beginning July 1, faces a third and final reading by city commissioners Thursday night. While the general operating budget is $76.4 million, compared to just over $70 million this year, a projected revenue increase takes care of much of that.

As assistant City Manager Randy Trivette told commissioners in their first budget hearing, “we’ve noticed sales tax continue to increase, we’ve noticed a lot of development and increases in our property tax revenue not based on raising those property taxes but just based on growth in the city.” 

That growth isn’t enough for the biggest pay increase in memory, though. The city projects it will need about $3.2 million from what Ball called a very healthy fund balance to make next year’s numbers work. That will come, though, from a balance of more than $40 million, with about $20 million of it in excess of the minimum balance the city requires itself to carry.

And Ball said the deficit may end up smaller.

“We tend to, especially this year, be very conservative in our revenue estimates,” she said. “We projected a 3.5% increase in sales tax. Over the past year, I would say we’ve only had one month that’s been even close to that. Most of them have been in double digits.”

Growth management another investment area

Ball said the other two main focuses of the new budget are managing growth and providing quality services. Two high priorities for the fairly near future are finding a consultant to help lead Johnson City through a growth management process, and conducting a downtown parking study.

Continued infrastructure improvements are also on the agenda. Ball said several pending annexation requests the city is considering could result in more than 5,000 new residents when the projects associated with them are complete.

Johnson City City Manager Cathy Ball, right, discusses the 2023 budget with commissioners Jenny Brock and John Hunter earlier this month. (WJHL Photo)

“I think part of what we need to demonstrate to the community as growth comes in, is we can keep up with it in terms of the infrastructure,” Ball said. “I think there’s a lot of good infrastructure and improvements that are in place and happening right now in the city, but I think we’re going to have to continue to demonstrate that we can keep up with that.”

Ball said the administration that preceded her, led by Pete Peterson, left the city in better financial shape than any other city she’s worked (including Asheville, N.C. and Greenville, S.C.). She also doesn’t foresee a reversal of Johnson City’s growth trend, which brings more revenue.

But she said deficit spending can’t become a longer-term trend.

“That’s not sustainable for over a period of five to 10 years. So we will continually be monitoring that and be looking at sales tax. And you know, the key thing is the money that’s coming in, we’re going to need to invest in our community.  

“So as we see these increases in sales tax we’re seeing increases in the need for infrastructure, the increase in the need for affordable housing. So we have to reinvest in our city to continue to have the quality of life that folks want to have here.”

Johnson City’s property tax rate of $1.73 per $100 of assessed value is the lowest of the three main Tri-Cities. Kingsport’s rate is $1.87, and its board of mayor and alderman appears set to approve an increase to $1.99, about even with Bristol, Tenn.’s rate.