Revaluation means tax gap
SALISBURY ó With property values plunging in the recent revaluation, governments across Rowan County are faced with a tough decision: slash budgets or raise taxes.
In most years, elected officials arguing for a tax increase want to add services or employees, or sock away the extra money for a rainy day. This year, any tax hike would likely mean maintaining the status quo, at best.
Itís called revenue neutral, and it simply means the tax rate a governing body would need to set to generate the same amount of money in an upcoming fiscal year as the tax rate did this year.
After a typical revaluation, the debate over a revenue-neutral rate centers around whether to cut taxes or use the increased tax base ó the total value of all taxable property ó and the resulting windfall, to add or improve services.
Not this year.
In the county, the tax rate would have to go from the current 59.5 cents to 62.08 cents per $100 of assessed value to make up for a 2.9 percent decrease in the tax base. Thatís before adding a tax to pay for needed repairs at Rowan-Cabarrus Community College.
Rowan County commissioners are already staking out their positions
Commissioner Raymond Coltrain has said he would increase the tax rate to the revenue-neutral level. Board Chairman Chad Mitchell says he would be willing to start at the higher rate and cut from there.
Commissioner Jon Barber said heíd rather start at the current rate and work up as needed.
Commissioners Jim Sides and Carl Ford have said they want to stay at the current rate.
And volunteer fire departments took the unusual measure of asking the county for one big public hearing on raising their tax rates to revenue-neutral, instead of two dozen separate hearings.
Municipalities are wrestling with the same questions. Though the next fiscal year begins July 1 and budgets donít have to be approved until the end of June, revaluation numbers are already hanging over officialsí heads.
Salisbury City Manager David Treme said he hasnít decided what tax rate he will propose to City Council when he presents the budget May 3.
The cityís current tax rate is 59 cents per $100 of valuation. However, due to the recent revaluation, the city would need to increase its tax rate next year by 5.2 cents to bring in the same amount of revenue from property taxes.
A new tax rate of 64.2 cents would be ěrevenue neutral,î meaning the city would neither lose nor gain revenue.
ěBasically what you are doing is adjusting your rate but not taking in any more tax dollars than you did last year,î Treme said.
Treme said heís working with the cityís management team to determine what tax rate to propose.
ěThatís what Iím trying to figure out right now,î he said.
Because property values have gone up in the past, Treme said heís never had to propose a higher tax rate to achieve a revenue-neutral budget. But the Rowan County Tax Assessorís Office projects Salisburyís property tax base will fall $200 million next year, a 6.9 percent decrease from the current tax base of $2.9 billion.
Even before revaluation, which the city asked Rowan County to delay, Salisbury faced a $2.7 million budget shortfall due to the poor economy.
To close the budget gap, Treme said he is considering reductions in staff, services, operating expenses and capital projects.
Through March 31, the city is offering a payment worth three monthsí salary to employees who retire early. The number of people taking early retirement wasnít immediately available.
The city has about 35 vacancies, which are frozen, but Treme said that wonít be enough. He warned employees last month of potential layoffs, furloughs and salary cuts.
Hereís whatís happening in the rest of the municipalities, in alphabetical order:
China Grove officials are looking to reduce spending to compensate for lost revenue.
Last yearís tax base was $280 million and this yearís will be closer to $263 million, said Interim Town Manager Ken Deal.
China Groveís tax rate is 43 cents per $100 of value. In order to be revenue neutral, the town would have to increase the tax rate to 48 cents.
ěOne penny of our new value would generate $25,000,î Deal said. ěWe would lose over $100,000 if we would have to reduce services and staff.î
Town officials have had one budget meeting and have not made any final decisions about budget cuts.
ěThe town council and staff will look at opportunities to reduce spending and provide an adequate level of services to the citizens,î Deal said.
Even with cuts, the staff could recommend an increase in the tax rate to be revenue neutral, but Deal said he hoped that wouldnít mean taxpayers have to write bigger checks.
ěI hope the citizens would not have to pay more on their property, but have the same amount they paid last year. We hope it would be the same,î he said.
Clevelandís tax base is taking an 8 percent hit due to revaluation, falling from $173.8 million this fiscal year to an estimated $160 million.
Town officials say the property tax rate would have to be raised by 2 cents per $100 assessed value in order to keep the current revenue stream at a neutral level.
Mayor John Steele said itís unclear if taxes will be hiked to make up for the $31,500 in lost revenue.
ěOur town clerk is still awaiting data from state and county sources that will effect the ability of the town board to begin the yearly town budget formulation, setting and adoption process,î he said.
Cleveland has the lowest property tax rate in the county at 21 cents per $100 assessed value. The tax rate has climbed by 2 cents in the past decade.
Steele acknowledges the drop in the tax base could have a negative impact on the town, but said he wants to find a way to keep things intact with limited cuts to services and staff.
ěIt is recognized by all Cleveland citizens that the cost of living is rising for everyone, including municipal governments, and that adjustments will have to be made when planning for the townís yearly expenditures and tax rates,î he said.
Steele said budget talks are set to begin in May.
East Spencer’s tax base is estimated to decrease by $8.9 million to a total of $98 million.
Its current property tax rate is 63 cents per $100 of valuation ó already the highest of the county’s municipalities.
Annessia Hyde, town clerk and acting town administrator for East Spencer, said last week the board has not discussed the upcoming budget yet and she doesn’t know where they might decide to set the tax rate.
The town would have to raise the rate by 5.7 cents to take in the same amount of tax money as last year, according to Salisbury Post calculations. That number is based on information provided by the Rowan County Tax Assessorís Office and may not be the exact figure given to the board, since towns may project revenue growth as part of their multi-year budget planning and are allowed to use that projected growth in figuring a revenue-neutral rate.
Faithís tax base is expected to drop from $63.8 million this fiscal year to $60.6 million next year due to revaluation.
According to Post calculations, the town would have to increase the property tax rate by 2.2 cents per $100 assessed value in order to break even without making cuts.
But Faith Alderman Mark Shores says despite a 5.1 percent decrease in the townís tax base, he doesnít anticipate the town board voting to raise taxes.
ěWe will have to look at ways to cut expenditures and hopefully not have to cut any of the services that we provide our citizens,î he said.
Shores said the town has yet to begin budget talks, so heís uncertain what might be slashed.
ěWe may just shave some here and shave some there,î he said. ěAnd we do have a good fund balance that we could pull from if we need to, but we donít tend to do that.î
According to records from the N.C. Department of Revenue, Faithís tax rate has held steady at 41 cents for at least the past decade.
Shores wants to see that trend continue.
ěWe donít want to put the burden on our citizens for the drop in revenues, if we can manage without affecting them we feel like that would be the best solution for this issue,î he said.
In his budget preparations, Town Manager Dan Peters is staring at some grim revenue projections and the probability heíll have to recommend a tax increase.
ěThis is our worst year,î Peters says.
According to Peters, Granite Quarryís tax base has dropped 4.85 percent, or roughly $10.6 million, with the new valuation. For fiscal year 2010-11, Granite Quarry based its property tax rate on a valuation of $213.6 million. This coming fiscal year, the valuation has dropped to roughly $203 million.
Granite Quarryís current property tax rate is 33 cents per $100 valuation ó the third lowest among municipalities in Rowan County, behind Cleveland and Rockwell. Peters says the rate will have to increase by at least 2.5 cents per $100 valuation to remain revenue neutral.
But with other money streams being hit, such as sales taxes, investments and vehicle tax collections, Peters may have to recommend a tax increase of 3.5 cents per $100 valuation, just to maintain the present level of town services.
A big unknown for Granite Quarry and other towns is fuel costs and what to budget for that rising expense, which essentially extends across every department.
ěI donít even know where thatís going to go,î Peters says.
And when fuel costs go up, sales tax revenues decrease because drivers look for ways to conserve.
In recent years, Granite Quarry has streamlined its services as much as possible, Peters says. He will be looking closely this budget season at additional ways to reduce insurance costs.
On the personnel side, the town has not filled an open maintenance position.
Kannapolis is in the best shape of all Rowan Countyís municipalities, but thatís because most of Kannapolis isnít in Rowan.
The majority of the city lies in Cabarrus County, and so does most of its $3.7 billion tax base, which included about $468 million in Rowan valuation this year.
City Manager Mike Legg said it appears development in Cabarrus will increase the tax base by about $39 million this year. He projects the decrease on the Rowan side to be $40 million.
ěSo, right now it looks like a wash for us,î Legg said.
Legg said other than growth at the N.C. Research Campus ó where tax revenues are restricted to paying the debt on a bond issue taken out for improvements ó Kannapolis didnít budget for much an increase in total tax value from last fiscal year to the current one.
The coming year, he said, looks to be similar, meaning ěnot much change, but not a lot of painî like other municipalities. Legg notes, though, that Cabarrus plans a revaluation in 2012.
ěOur pain may be next year,î he said.
The town of Landis has only recently begun the budgeting process and the board has instructed the staff to look at ways to save money.
Landisí tax base was about $244 million last year, while this year it will be $228.5 million, said Finance Officer Ginger Gibson.
ěThis will affect our annual budget by $61,000 that we will be short off the beginning,î Gibson said.
The tax rate in Landis is 40 cents per $100 valuation, and that resulted in $947,000 in tax collections for the current budget year. The town expects to take in $866,000 in the coming year.
The town didnít provide a projected revenue-neutral tax rate, but according to Post calculations based on county figures, the town would have to increase its rate by at least 2.3 cents.
Gibson said the staff suggested the employees take furloughs as they did last year.
Last year the employees took one furlough day a month for an entire year and it saved the town $5,000 a month for a total of $60,000.
ěFurloughs are the easiest, but the board does not want to put the weight of it on the staff,î Gibson said.
Other options include increasing fees or eliminating jobs, a measure Gibson said the town hopes to avoid.
ěThatís our purpose, to keep benefits and have employees keep their job. I know it is asking a lot, but thereís so many people in this world that are losing their jobs, she said.
Gibson said town board members have ěgiven us a direction and the staff is coming up with plans.î
Mayor Beau Taylor says he supported revaluation because ěit had to be done,î even though it means the town with the second-lowest property tax rate in the county might have to raise taxes.
ěWe either did it this year or next year,î Taylor said. ěI felt like it was the proper thing to do. Go ahead and do it so we know where we can go, and move forward.î
To stay revenue neutral, the town is looking at an increase of between 1.5 and 2 cents on top of its current property tax rate of 27 cents per $100 of tax value.
Rockwell lowered its tax rate in 2003 from 27 cents per $100 valuation to 25 cents, but raised it back to 27 cents in 2005.
Last year, the town dipped into its savings to avoid another tax increase.
ěYou canít keep digging into it,î he said. ěWe canít cut much more. Weíve cut to the bone. And you canít furlough anybody in Rockwell because you donít have anybody to furlough.î
Rockwell employs 11 people in public works, administration and the police department.
ěWeíve cut back spending as far as any purchasing of equipment and there hasnít been any raises or cost of living (pay increases) in the past five years,î Town Clerk Sue Morton said.
Morton said town officials wonít know the whole picture until the state releases sales tax projections and they learn ěwhether those figures are going to drop this year because of the economy.î
With the townís first budget workshop planned for the end of April, however, they know finances are tight. [0x1d]
ěI donít know where we can cut anymore,î Morton said. ěWeíre working primarily on a service budget.î
Spencer faces an 8 percent decrease in the townís tax base, expected to fall from $211 million to $194 million in the next fiscal year, which begins July 1.
ěWeíve always evaluated expenses and revenues and operations in general to see whatís working and whatís not, but this year more so than ever,î Town Manager Larry Smith said. ěThereís no way to stress how much effort we are putting into the evaluation of operations.î
Department heads are searching for any area ěwhere we can get by with less,î Smith said, and heís looking ěinto the core of the departments themselves and how they are run.î
The town would have to increase its 60-cent tax rate to 65.6 cents per $100 valuation to maintain a revenue-neutral budget.
Smith said he likely will prepare two budget drafts ó one maintaining the 60 cent rate and another with a higher rate.
His budget proposal likely will not include layoffs.
ěWeíve already tapped our resources as far as personnel,î Smith said.
The town hasnít added new positions in the past decade and has cut some to part time. Spencer employs about 60 people, including 34 full time.
ěWe are concentrating all efforts on efficiency,î he said.
Fees could go up for services other than garbage, he said.
However, the town could change the way trash is collected. Spencer now offers ěback yardî trash pick-up, meaning collectors will gather trash cans from the back yard of a house.
The town could switch to curbside collection, where residents roll out a bin to the curb, or contract with a private company to provide garbage service.
ěWe are struggling, just like everyone else youíre talking to,î Smith said.