Amended Elizabeth City, N.C., budget keeps pace with county tax hikes

ELIZABETH CITY

When the city manager walked into a budget work session Monday, he thought he would be presenting a list of cuts that would eliminate a suggested 1-cent property tax increase.

When Rich Olson walked out of the meeting, however, the City Council had voted 4-3 to raise the tax 4 cents.

Now he's working on a revised proposal that would bring back some of the items trimmed out of the original.

"There were a lot of projects that were not included in the city manager's budget," Olson said Tuesday. "They were projects that had a lot of merit... but the staff didn't think they would be funded at this level."

The 4-cent tax increase would bring the city's property tax rate to 45 cents per $100 in valuation.

Coupled with a proposed 5- or 6-cent property tax increase in Pasquotank County, city property owners could pay about $1 per $100 valuation.

It was the county's proposed tax increase and its effect on the city's sales tax revenue in the coming years that sparked the City Council's change of heart.

Olson said that over the years, the City Council's reluctance to raise property tax rates has worked against it when it came time to split sales tax revenue with Pasquotank County.

The way the reimbursement is calculated, the city lost money when the county raised its tax rates and the city did not.

According to an e-mail from Randy

Keaton, county manager, the city and county send their respective tax levy information to the North Carolina Department of Revenue each year. The levy then is used to determine the sales tax distribution for the following fiscal year.

For example, in the coming fiscal year, set to begin July 1, the sales tax distribution formula is based on the property tax rates the two governments set last year.

Elizabeth City raised its tax rate 1 cent and Pasquotank County raised its rate

2 cents.

Because the two governments' increases were proportionate to each other, there is no revenue loss in the coming year.

However, if the city does not raise its property tax rate for the coming fiscal year and the county moves forward with its 5-cent increase, Olson said, the city stands to lose $200,000 in the following year in sales tax revenue.

"It's almost a disincentive to be good stewards of the funds," Olson told the council Monday.

Mayor Pro Tem Jean Baker said that it had been several years since the city had a major tax increase and that while the costs are increasing for residents, they're also increasing for the city.

"We've not gotten any bargain because we're a city," she said. "We're crazy to think we can keep operating on the same tax level."

Her suggested 4-cent property tax increase was approved 4-3, with Councilwomen Betty Meggs, Anita Hummer and Volanda Watts voting against the measure. Councilman Kirk Rivers was absent from Monday's meeting.

Hummer said she did not approve of the reason behind the increase.

"We have to cut somewhere else," Hummer said. "I think the better idea is to get the county to help us. It's not fair to hit the citizens up."

A public hearing on the city budget already was scheduled for Monday. Now, the city manager is working on updating the proposed budget with the 4-cent property tax increase.

Things that may be added back into the budget include police car cameras and software so police can do in-car reporting. The updates will be presented to the council during a special budget work session before the regular meeting.

"We will be working on numbers up until the Monday work session," Olson said.

Keaton also will update his budget proposal for a county presentation Monday. The commissioners asked him to work up a new proposal with a 6-cent property tax increase. Commissioners will consider that proposal along with a previous 5-cent tax increase proposal.

The county's current tax rate is 50 cents per $100 valuation. A public hearing for the county budget is scheduled for June 23.

Lauren King, (252) 338-2413, lauren.king@pilotonline.com