It appears City Council wants to cut City Manager Montre Freeman’s proposed 10-cent property tax rate hike in half.
Freeman told city councilors Monday that after meeting with them individually that there’s a “consensus” for a property tax rate increase of 5 cents.
“That five cents is based on conversations that I have had with everybody,” Freeman said. “The five (cent rate hike) has come from more than one person around council. It is something we can work with and put together into a plan.’’
Freeman last month proposed a 10-cent increase to the city’s property tax rate, in part to better position the city to borrow money for much-needed water and sewer upgrades. A 10-cent hike would increase the property tax rate from 65.5 cents per $100 valuation to 75.5 cents.
The city’s last property tax increase was in 2017 when council agreed to raise the tax rate by 1.5 cents. That extra money was used on items in the city’s 2017-18 budget.
If Freeman’s proposed 10-cent tax rate increase was approved by council, a city resident with a home valued at $100,000 would see their annual property tax bill increase by $100. A 5-cent increase in the rate would cost that homeowner $50 more a year.
Freeman told councilors when he presented his budget for 2021-22 last month that the tax increase is needed to boost the city’s fund balance. He said the city needs to be in a better financial position to take on debt to finance much-needed sewer improvements, and a stronger fund balance would accomplish that.
The city borrowed $320,000 from the fund balance last fiscal year to balance the city budget and it expects to borrow an additional $500,000 in the current fiscal year. The city also borrowed from its fund balance the previous two fiscal years.
Those transfers will drop the fund balance to 19.5 percent of the city’s general fund expenditures at the end of the current fiscal year that ends June 30. The fund balance was at 20.71 percent at the end of the last fiscal year on June 30, 2020.
While the N.C. Local Government Commission recommends local governments keep at least 8 percent of their general fund expenditures in fund balance, City Council has a policy of keeping that percentage at a minimum of 15 percent.
The LGC must approve a municipalities’ request to take on debt.
“The 10 cents (increase) addresses that LGC because, again, I’m trying to make sure we are in the best possible position to issue debt if we need to,” Freeman said. “The issuing of debt for addressing (sewer) capacity is not going to be a small number.’’
The city is also set to receive almost $5.2 million in federal COVID-19 funds and that money could be used to fund infrastructure projects.
Freeman also said a healthy fund balance would help the city in the event of a natural disaster such as a hurricane, noting that reimbursement from the Federal Emergency Management Agency for storm damage is a lengthy process.
Freeman also said the city had spent $221,000 as of May 7 on additional public safety in the aftermath of the shooting death of Andrew Brown by Pasquotank sheriff’s deputies on April 21.
“And we are still going,” Freeman said of the added cost. “No one in the country prepares for civil unrest, but here we are.’’
The city is also about to receive the results of a pay study and Freeman expects that to show that employee pay is 16 percent “under where we need to be with our salaries.”
“That 10 cents (property tax rate increase) answers all of these questions,” Freeman said.
City Council must approve a 2021-22 fiscal budget by June 30. Councilors are expected to hold another budget discussion on May 24.