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While tax base rises, rates remain the same or rise also

The easels, charts and spreadsheets are packed away. The spending “challenges” scrawled on sticky notes have been addressed and budget “opportunities” met or discarded. The sugar high brought on by hefty growth in the tax base has given way to a recognition by elected officials across Henderson County that they needed the higher tax base to fund capital projects and meet growing service demands.

 

Administrators have reintroduced the term Revenue Neutral Tax Rate and calculated the rate for the elected bodies. Across the board, the elected leaders missed the mark when it came to adopting a revenue neutral tax rate. Result: Taxes are going up for most homeowners and businesses, even where tax rates are staying the same or dropping slightly.
In Flat Rock, the Village Council last week adopted a tax rate of 13 cents per $100 valuation, 2 cents more than the current year and 3 cents above the revenue neutral rate. Vice Mayor Nick Weedman argued for a12-cent tax rate.
“A lot of properties went up considerably on the valuation so what you have in a lot cases is higher valuation and a higher tax rate,” he said. “I think people are going to be shocked by the tax bills that come out in September.”
In Mills River, Town Councilman Wayne Carland winced at a 33% increase in the park and recreation budget. In defense of the increase, interim Town Manager Mark Burrows noted that the park is by far the most popular service the town offers,.
“That is the one area that seems to me to have the greatest activity and the greatest appreciation by your citizens,” he said. “My observation is it’s been a high priority of this board and it’s greatly appreciated by the citizens.”
Even with a penny drop in the town tax rate, Carland responded, homeowners will pay more. “Out of pocket (taxes) to the average citizen is up,” he said.


Green space requires green$$$

 

Parks and greenways. People love ’em. Police, firefighters and EMTs. Background noise until you need one. Then you really need one. The list goes on: New police stations and fire stations to accommodate growth. Improvements to keep the county’s primary tourist attraction — downtown Hendersonville — tourist friendly (read: new bathrooms!). Investment to revitalize the Historic Seventh Avenue District. Armed guards in every school. A new $70 million Hendersonville High School. Millions of dollars in major repairs and renovations to public schools and the community college. Prosaic but needed street repaving.
These items drive higher budget totals that go into effect on July 1, paid for by property tax bills that arrive in homes and business offices in September.
From Mills River, Fletcher to Flat Rock, small towns continue to invest big in parks. Hendersonville is making a $12 million gamble on Seventh Avenue, parachuting a new police headquarters onto Ashe Street. Henderson County is paying for SROs in 23 schools. All of the spending meant that governing boards went north of the revenue neutral mark by anywhere from 2 to 5 cents. No fire district adopted a revenue neutral tax rate and eight of 12 in fire & rescue departments increased their tax rate even as their tax base rose. In fact, fire tax increases account for overall property tax rate rises in Flat Rock, Mills River and Laurel Park.

 

What is revenue neutral?

State law requires cities to counties to calculate and publish a revenue neutral tax rate.
“The RNTR is intended to show the tax rate that would keep the local government’s revenue neutral given its new tax base,” Chris McLaughlin, an associate professor of public law and government at the UNC School of Government, wrote in an explainer. “Well, not exactly neutral: the statutory calculation increases the current year’s revenue by the average annual growth rate experienced by the local government’s tax base since the last reappraisal.
“The RNTR must be published but it need not be adopted,” McLaughlin notes. “If the local government adopts a tax rate greater than the RNTR—even if the new tax rate is lower than the current tax rate—then it effectively increases its revenues and increases the tax burden on its citizens.” 
Owners of property in downtown Hendersonville will experience that dynamic in black and white when they open their tax bills. Although the City Council lowered the tax rate for the downtown taxing district by 2 cents — from 28 to 26 cents — that new rate is still 4½ cents higher than the revenue neutral rate. Values downtown spiked by 38.2%.
The higher tax base values ranged from the gain of 11.7% in Flat Rock to the windfall (tax revenue wise) of 38.2% in downtown Hendersonville. The increase countywide was 15.8%. As Weedman and Carland noted, taxpayers will see the increases in the fall when they receive their 2020 tax bills. But far more homeowners turned out to protest road widenings, ask for ERA support or demonstrate for and against a gay pride day than showed up to comment on the new tax rates. “Revenue Neutral Tax Rate” is not a phrase that grows legs on social media.


4-year spending plans

A key factor in the increases across the board, including fire tax increases, is that cities and fire districts all the use the four-year revaluation as the framework for a four-year spending plan as well. Elected officials and fire chiefs in general say that they hope to keep the 2019-20 rate in effect until the next countywide reassessment, in 2023.
“Where do commissioners think our citizens will find this extra cash to pay this huge increase in property tax bills?” William Vine, the only taxpayer to protest the county’s rate of 56.1 cents, said during the public hearing on the $146 million county budget. Vine no doubt would regard county commissioners’ move to trim the tax rate by four-tenths of 1 cent as a Pyrrhic victory.
“Although the assessed values in the county have increase over 13% over the past four years the income of most residents, especially the retired, have not kept pace anywhere near that amount,” he said. “Do they think they can confuse us by claiming a slightly lower property tax rate while relying on increased property values to drastically increase our tax bills?”
Up next, Ken Fitch, a regular commenter on public policy, piggybacked on Vine’s lamentation.
“It is probably safe to say the euphoria over the revenue neutral tax rate has vanished,” he said. “Given the reality of the responsibility to provide essential services for education, law enforcement, fire prevention, emergency services, health and social services and infrastructure, the taxpayer obligation for the coming year looks to be substantial.”