The county Board of Commissioners will soon begin what will be a difficult task of crafting the budget for the fiscal year that begins on July 1. But this year, presumably, discussions will be different, with the tail wagging the dog instead of the other way around.
If the commissioners are true to their word, the tax rate for next year has already been established at 77 cents for every $100 of property — a drop of 2 cents from the current tax rate. The 2-cent drop was the promised reward for property owners voting during an August referendum to allow the county to bump the sales tax by one-quarter cent.
The sales-tax hike, which took effect Jan. 1, was dangled as a good deal for the county and for taxpayers. Projections were that it would raise about $2 million during a fiscal year, much of that money being yanked from the pockets of people who travel through this county on all our major roads; it was also touted as more equitable way for the county to raise additional revenue as everyone who enjoys county services would pay the tax, and not just property owners.
In exchange, the county would whack the 2 cents from the tax rate, a savings of about $1 million for property owners. When all the math was done, the county would have an additional $1 million to meet its expenses.
So the county, instead of establishing a tax rate to raise sufficient revenue to meet its expenses, will be in a position of trying to manipulate expenses to meet the amount of revenue a 77-cent rate will generate. It’s a box the county voluntarily put itself into — and the fit got a lot tighter during the Board of Commissioners’ recent retreat at COMtech.
During the retreat, Finance Director Kellie Blue warned the board that Gov. Bev Perdue’s budget shifts some funding mandates from the state to the county as way for the state to meet its $2.4 billion shortfall. Much more will be said in Raleigh about Perdue’s proposals, but if they stood, Blue said it would add about $4 million a year to the county’s expenses for the next two fiscal years. Interim County Manager Ricky Harris said that could force a tax-rate hike of 8 to 10 cents, which is a Grand Canyon away from a decrease of 2 cents.
The county doesn’t have many other paths to walk down. Capital projects are already on hold, most vacant positions are on ice, and sales tax revenues, because of the recession, have been lower than expected although they are rebounding. Moreover, almost all of the county’s spending is not optional, a truth that is often lost on the public.
We’re not sure how the county will get out of this box, but don’t be surprised if in June the commissioners are telling taxpayers that the tax rate, while it didn’t go down 2 cents, would have been 2 cents higher if not for the sales-tax hike. And that might be true.
But when rebellious taxpayers counter that’s not what the county meant when it offered the deal in advance of the August referendum, that will be true as well.