Politics

Council endorses 2-cent property tax increase

By Bill Moss, Published: May 8, 2015

Hendersonville residents can expect a property tax increase this year of 2 cents per $100 valuation.

During a workshop on a 2015-16 draft budget proposed by City Manager John Connet, Hendersonville City Council members trimmed Connet's recommended tax increase by a half center but said they could not see how they could go lower than that.
The 2-cent property tax increase would raise the city tax rate to 46 cents per $100 valuation. Connet recommended the tax increase to make up for the loss of a business tax the Legislature repealed. The repeal will cost the city $386,000 in the fiscal year starting July 1.

Other rising expenses in what city administrators called “a perfect storm” of financial pressure include debt service of $250,000, a $200,000 increase in health insurance and salary and benefits growth of $250,000.
In addition, the recommended budget retreats on capital projects and other initiatives the council has considered in the past two years, cutting $300,000 for Berkeley Mills Park, $100,000 for a Seventh Avenue parking lot and $45,000 for a police officer to monitor skateboarders at Patton Park. The manager and department heads also offered up another $696,160 in cuts in personnel, professional services and other projects. On the chopping block were a public works backhoe and another vehicle, Grey Hosiery Mill roof repair, a Dogwood parking deck study, a bicycle grant matching grant, a pay study. The budget adjustment also trimmed a proposed city pay raise in the upcoming year by $62,250 — cutting a cost of living increase from 1 percent to a half percent and cutting the merit increase range from 1½-3 percent to 1-2½ percent.
The tax increase would come on top of any bump-up in value a property owner saw from the 2015 reappraisal. For most city homeowners and businesses, that amount was small, the administrators said.
“We were hoping that this time this year we would have growth but we didn’t,” said Finance Director. “We only had 1 percent growth.”
“We thought we’d have 3 or 4 percent growth,” Connet said.
The overall taxable valuation in the city grew by just 1.68 percent, a gain that would generate about $114,000 under the current city tax rate of 44 cents per $100 valuation. The revenue neutral rate tax rate — the rate the city would impose to collect the same amount of revenue as the current year — would be 43.25 cents.
Mayor Barbara Volk and Jerry Smith endorsed the 2½-cent increase Connet recommended; council members Ron Stephens, Steve Caraker and Jeff Miller pushed for a 2-cent increase. The council agreed to that.
“The business owners pay the majority of taxes,” Stephens said. “A lot of them have not recovered form the recession and you’re going to raise their taxes.”
But because the budget relies on the property tax to make up for the loss of the privilege license tax, many businesses could see a tax reduction, especially those with big retail sales like Wal-Mart, Lowes and Home Depot and car dealers.
“The burden would actually be shifted more to residents with losing privilege license taxes and shifting to the property tax,” budget analyst Brian Pahle said.
“We’re backed into a corner,” Caraker said. “You tell me what services you want to cut to get no tax increase. Somebody complains about a tax increase I say ‘what do you want to give up?’”
A big driver of the tax increase and spending cuts was the fact that the city has spent down its reserves by $1.8 million over the past 10 years. The new budget takes another $553,000 from the fund balance, dropping it to 33 percent. Council members agreed to change city policy from maintaining reserves of 45 percent of the city’s general to 35 percent.
“We’re in good shape, we’re healthy, but we have to develop a plan for how we slow or stop that reliance on fund balance,” Connet said. “The way we raise revenue has squeezed down and here it is now. We’ve got to make decisions on what level of government we’re going to fund.”
Connet recommended the city save $150,000 by retreating from a decision made last year to devote a penny’s worth of property tax revenue to streetwork. Led by Miller, the council rejected the recommendation and agreed to sustain a 1-cent-a-year commitment.
With the cut, city motorists would have seen “much less paving,” Public Works Director Tom Wooten said. A priority for 2015-16 is Fifth Avenue, he added.