City’s Tax Base Grows 25 Percent

By Leslee Kulba – Asheville City CFO Barbara Whitehorn said the FY 2017-2018 budget was prepared as a continuation budget, and it remained for council to set the tax rate. Last year’s adopted budget projected $110 million in general-fund revenues, enterprise funds adding another $60 million to the total. Property taxes accounted for just over half of projected general fund receipts.

 

As of the second quarter, sales tax revenues were up 8 percent, HB2 not wrecking so much anticipated havoc, but staff used the state’s estimate of 4.5 percent for next year. License and permit fees were expected to be down 10 percent, as no major projects, like expansion of Mission Health, were in the works. Following the revaluation, property values increased 25-30 percent. Appeals to revals are projected to decrease overall growth by only about 2 percent.

The city’s current tax rate is 47.5 cents per $100 of valuation. A conservative estimate of 20 percent growth would require the tax rate to be scaled back to 39.5 cents to keep property tax collections at their current levels. But then there were the bonds. Last year, Asheville voters approved the issuance of $74 million in municipal debt. $25 million would go toward affordable housing projects; $17 million, parks and recreation; and $32 million, multimodal infrastructure improvements.

Since the city has twenty years to service the debt, voters were told, all other factors being equal, the debt would be paid with a 4.15-cent increase in the property tax rate. The current growth rate will allow the city to lower that amount to 3.1 cents this year. Adding costs of administration and contracting, the bond burden moves closer to 3.5 cents. So, the revenue-neutral rate, plus the cost of implementing and servicing bond debt, brings the city’s tax rate to 43.0 cents. The PowerPoint presentation displayed the difference, equivalent to $6.28 million for the city, as the amount “remaining.”

City staff are being strategic about the timing of drawing down bond debt in order to contain servicing costs. Were the city to draw down all the debt at once, taxpayers would be on the hook for 6 cents per $100 valuation.

In response to questions and commentary from Mayor Esther Manheimer and Vice Mayor Gwen Wisler, Whitehorn said the budget was built with the assumptions that the Fed would be raising interest rates over the near-term, and that state senator Harry Brown’s proposal to change the formula for redistributing sales taxes among cities and counties would likely cost Asheville $500,000. Councilor Gordon Smith asked about a number of big-ticket federal grants the city receives that people are hinting may be discontinued. Whitehorn replied there was no way to “realistically budget” for, in not so many words, whim.

Smith asked if the federal funds for transportation improvements in the River Arts District were at all threatened. City Manager Gary Jackson said the project was under contract already, and somebody muttered, “It could be the executive order of the day.” Jackson translated, “We have as much confidence as we can have given the circumstances;” to which Smith replied, “I’ve lost all confidence.” Smith foresaw the need to “gear up for a series of crises,” and Manheimer said the current trend is for the state and federal government to shift responsibilities to the local level.

Manheimer made sure the budget included pay increases for staff. Whitehorn said it did, but council would have to determine specifics. Manheimer also wanted to retain funding set aside for the Lee Walker Heights renovation project in the event its re-application for state tax credits proves successful; and she wanted serious consideration given to refurbishing or replacing municipal swimming pools. Wisler and Councilor Julie Mayfield requested more detailed information on downtown crime.

Most other requests pertained to climate change. Mayfield presented a list of un-ratified proposals to be put before the Energy Innovation Task Force, which included contributing $50,000 to an ongoing partnership with the Rocky Mountain Institute to forestall construction of a third generator at Duke Energy’s Lake Julian plant, investment in home weatherization, and participation in a marketing program to change the way people think about electricity use. She was non-plussed that Buncombe County Chair Brownie Newman had preferred to invest green funds in institutions instead of people.

Councilor Cecil Bothwell described global climate change as an “existential threat to humanity” and thus an imperative for action. An extra penny on the tax rate for home weatherization would thus be well spent. He asked for $25,000 for a tree canopy study and for expediting of the city’s transit plan. Wisler expected the legislature would support a bill empowering cities to lend homeowners money for financing green retrofits, and hoped Duke would adopt a similar lending program. Wisler also inquired about the feasibility of incorporating energy audits into the facilities master planning process.

 

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