A request to increase the county property tax rate is anticipated when county staff present a budget to the New Hanover County Commissioners for approval later this spring, a prospect briefly discussed by the board during a March 20 special meeting on the budget.
The purpose of the meeting, attended by commissioners as well as senior county management and department heads, was to establish strategies and priorities for staff to consider as they prepare the 2015-16 fiscal year budget. When presenting the current fiscal year’s budget to the board last spring, county manager Chris Coudriet warned of the upcoming need to raise the property tax by 5 cents. Coudriet said staff is currently crunching numbers assuming no change in the county’s two main revenue sources — a property tax rate of 55.4 cents per $100 of value and a 2.25 cent portion of the sales tax — but mounting debt obligations from voter-approved bonds in 2006 and 2008 require additional funding.
“We are working off the tax rate being 55.4 cents, which is where it is. But my position, administratively, has not changed from last year, that we cannot adequately service our debt and meet our operating obligations without addressing the tax rate,” Coudriet said.
Without raising taxes, the budget will have to pull from the general fund balance to accommodate debt obligations, Coudriet said.
The proposed 5 cent increase covers debt obligation from an $18 million parks and recreation bond, approved by voters in 2006, and a $164 million Cape Fear Community College bond, approved by voters in 2008. The $160 million public schools bond approved by voters in 2014 will require an additional 3 cent-bump in the property tax over its 20-year repayment cycle, but Coudriet does not anticipate the 2015-16 fiscal year budget to reflect that.
“I don’t know that it will be commingled in the budget that we recommend in May, but any budget I recommend will certainly point to the future and clearly and publicly state that we have another $160 million obligation to address,” Coudriet said.
A revaluation of the county tax base, currently underway and slated for completion early in 2017, could help offset the debt obligation of the public schools bond, Coudriet confirmed, but the county will not be able to reap those benefits for another two fiscal years. The county lost about 15 percent of the tax base in the last revaluation in 2007, which Coudriet said translates to $5 or 6 billion. He expects most of that lost 15 percent to be regained in 2017.
Coudriet alluded to the debt issues early in the March 20 meeting, where commissioners revisited challenges and accomplishments over the past 10 years, outlined the current trends and issues facing the county, and reviewed and prioritized strategies outlined in a 2012 strategic plan.
Commissioner Woody White, a vocal opponent to the predicted tax raise over the past year, remained quiet for the first three hours of the four-hour-long meeting. But after the property tax increase was introduced as a critical issue to be addressed in the next year or two, White shared his concerns about the proportion of debt assumed over the last twenty years compared to population growth, a comparison of about 700 percent to a little more than 50 percent.
The main focus of local government, White said, is providing essential services within the county’s means without incurring additional debt. Each penny of the proposed increase removes $2.9 million from the county economy, White continued, which impacts job creation, hourly wages, and other measures of economic development commissioners outlined as top priorities during the meeting.
Commissioner Rob Zapple, who listed the county’s low property taxes as an asset, said he will do everything possible to maintain the lowest tax rate. Voters made their desires known when they approved bonds in 2006, 2008 and 2014, Zapple said, and his duties as an elected official include ensuring the county’s finances remain sound while managing those bond-funded improvements — a balancing act Zapple said he expects to require hard decisions.
“This is going to be the defining issue for the next couple months, and I don’t know the answer yet. I’m convinced there’s not a magic bullet,” Zapple said.
The budget development process has been underway since December 2014, Coudriet said, when department heads submitted their financial requests. The priorities determined by the board during the meeting will guide staff as they refine the budget, expected to be complete by late April.
Staff will present their recommended budget to commissioners during a May 4 meeting, which kicks off six weeks of discussion and revisions, including a June 8 public hearing, before the board adopts a final budget during the June 22 meeting. The 2015-16 fiscal year begins July 1.