Council OKs budget, sets tax rate

Published 12:29 am Wednesday, June 23, 2010

Contributing Editor

Washington’s City Council, with a 4-1 vote Monday, adopted a $64 million budget for the upcoming fiscal year, which begins July 1.
The council also set the property-tax rate for the 2010-2011 fiscal year at 50 cents per $100 valuation. The current tax rate is 60 cents per $100 valuation. The tax rate dropped because of the recently completed revaluation of properties in Beaufort County and its municipalities.
Council members Gil Davis, Ed Moultrie, William Pitt and Bobby Roberson voted for the budget and tax rate. Councilman Doug Mercer voted against it.
Mercer told his council colleagues he would not vote for the spending plan because there is a “substantial tax increase in this budget.” He questioned the figures that city staff used to develop a “revenue-neutral” tax rate. Mercer said his calculations indicate that a true revenue-neutral tax rate would be 44.23 cents per $100 valuation.
Matt Rauschenbach, the city’s chief financial officer, told the council that the Local Government Commission, an agency that oversees the fiscal affairs of local governments, agrees with the figures that city staff used in reaching the recommended tax rate of 50 cents per $100 valuation.
The difference between Mercer’s calculation and the staff’s calculation centers on how the city’s tax base is computed. Mercer’s tax base (value of all properties to be taxed) comes from the tax base used to develop the current budget. The staff’s tax rate was developed by estimating the city’s actual tax base for the new fiscal year, which reflects revaluation.
Mayor Archie Jennings said the tax bills that city taxpayers will receive matters more than the tax rate because those taxpayers will have to pay their tax bills.
Davis and Roberson said the newly adopted tax rate provides the city a safety margin that likely will carry it through the upcoming fiscal year, especially with an economy still trying to recover from the Great Recession.
After a revaluation, many counties and municipalities try to adjust their property-tax rates so they are revenue neutral, meaning the new tax rate when applied to the new property values generates the same amount of revenue as the previous tax rate and property values generated.
Rauschenbach determined that the revenue-neutral tax rate for the city in the upcoming fiscal year would be 47.44 cents per $100 valuation.
State law requires that after the city’s budget officer calculates the revenue-neutral tax rate, then he or she increase that rate by a growth factor equal to the average annual percentage increase in the tax because caused by improvements since the last reappraisal.
“This growth factor represents the expected percentage increase i the value of the tax base due to improvements during the next fiscal year,” reads the law.
Rauschenbach’s calculations show that the revenue-neutral tax rate, adjusted for growth, comes to 48.56 cents per $100 valuation.
The target property-tax rate of 50 cents per $100 valuation reflects city officials’ concerns the city could see some of its revenue sources not generate as much revenue as expected. Mayor Pro Tempore Bobby Roberson expressed concern that the Beaufort County Board of Commissioners may change the way it distributes sales-tax income to the municipalities in the county. That change could result in those municipalities receiving less in sales-tax revenues.
Also, actions by the General Assembly, now in session, could result in other revenue declines for local governments, city officials said.
In a meeting earlier this month, Roberson said the city “might need that” difference between the 50 cents per $100 valuation rate and the 48.56 cents per $100 valuation rate to offset possible loss of revenue from other sources.
Under the 50 cents per $100 valuation tax rate scenario, the taxes on a house whose value increased from $100,000 to $130,000 as a result of revaluation would come to $650 in the upcoming fiscal year. That amount is $50 higher than the taxes paid on that house — valued at $100,000 and taxed at a rate of 60 cents per $100 valuation — this fiscal year.
Under the 48.56 cents per $100 valuation scenario, the taxes on a house whose value increased from $100,000 to $130,000 as a result of revaluation would come to $631.28 in the upcoming fiscal year.
With the new tax rate set, about a third of city taxpayers will pay more in property taxes during the next fiscal year than they paid this fiscal year, according to city officials. Another third will pay less taxes, with the remaining third will paying about the same.
Jennings indicated he is pleased with the effort that staff and council members put into the budget.
“I feel like the staff finally understood the direction the council wanted to head,” he said.
Jennings also told city employees who were in the audience that the council wanted to protect their jobs.
“We didn’t want to put our people on the street,” Jennings said, noting that the new budget does not result in employees being laid off.