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Wednesday, 13 April 2016 14:20

Sylva board faces inevitable property tax increase

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sylvaAs Sylva’s leaders work toward a new budget for the new fiscal year, there’s one big question on everybody’s mind — how much will taxes increase?

When Jackson County wrapped up its revaluation for 2016, properties in Sylva town limits came back with a value more than 6 percent lower than they’d held in 2008, the last time a revaluation was completed. 

It wasn’t an unexpected outcome — though revaluations typically result in increased property values, this one came following an economic crash that had been preceded by a real estate boom. The 2008 values were based on an all-time high, and the 2016 values measure values mid-recovery after the recession. Macon County, which completed its revaluation last year, had to up its tax rate from 28 cents per $100 to 35 cents, and Jackson County will likely make a similar leap, moving from 28 cents to somewhere between 35 and 36. When property owners pay the same tax rate on a lower property value, overall revenue goes down. Local governments have been opting to boost the rate enough to keep its overall intake the same. 

But in Sylva, there’s an extra element at play. The town’s budget was already in trouble last year, before the revaluation was complete. In 2015, commissioners pulled $140,000 from fund balance — akin to the town’s savings account — to cover basic budget needs they couldn’t meet with tax revenue.

The tax rate, set at 30 cents per $100, hasn’t changed in 13 years.  

“We’re in a real bind,” said Commissioner Barbara Hamilton. “We’ve not raised the tax rate in 13 years, and your town can’t run that way.” 

Last year, commissioners wrangled with the possibility of a 2-cent tax increase to prevent their spending that $140,000 from the fund balance and lessening the hit property owners would no doubt take later, when the revaluation was complete and taxes were forced to increase. Hamilton and Lynda Sossamon, who was then a commissioner and is now mayor, voted in favor of the increase, while Commissioner Harold Hensley, Commissioner Mary Gelbaugh and then-Commissioner Danny Allen voted against it. 

 

Maintaining the budget

This year, all board members, including those seated after the 2015 elections, agree that the rate will have to go up. The question is by how much, and to what end. Should it just rise enough to cover the tax revenue lost to the revaluation? Should it increase enough to cover the budget shortfall that last year came from fund balance? And what about the budget itself? It’s pretty bare-bones right now — should the rate increase enough to fund some of the many projects commissioners would love to get done if the money were available? 

Commissioners seem to agree that those first two on the list — covering losses from the revaluation and preventing further borrowing from the fund balance — are almost certainly a given. That will mean a tax increase of 6 or 7 cents per $100, upping the rate to 36 or 37 cents, said Town Manager Paige Dowling. That would result in a total tax rate — counting town and county taxes — of 71 to 73 cents going forward, up from the current rate of 58 cents. Jackson County currently has the lowest county tax rate in the state. 

“You can’t operate without increasing your revenue for very long. The board went for 12 years without doing so. That’s why there’s going to be those two large tax increases,” said Commissioner David Nestler, referring to the hikes to cover revaluation and inherent budget shortfalls.  

 

Funding future projects

During a four-hour planning retreat in February, commissioner gathered to map out some ideas for Sylva’s future, projects to benefit Sylva in the long term. Public restrooms and water fountains for tourists. A skate park and teen center. Buried power lines downtown. Spruced-up entrances to town. The list goes on. They might be good ideas, but they all cost money. 

By boosting the tax rate 11 cents, to 41 cents per $100, the town would have enough money coming in to tackle some of those extras. But an 11-cent hike would amount to a 37 percent increase — pretty significant. 

For now, said Commissioner Greg McPherson, the best thing to do is probably to boost the rate enough to maintain the current budget and look for low-cost improvements the town could tackle without requiring extra funding. Like planting flowers on Main Street, or doing some piecemeal cleanup on Mill Street. 

“There’s a lot downtown right now that can be done in-house,” McPherson said. “We just need to focus some of our energy on some of those little projects.”  

Nestler agrees that it’s best not to raise taxes above the budget-neutral rate — at least not this year. Down the road, he said, the rate might need to rise again to make improvements to Sylva a reality. 

“You have to raise it intelligently,” he said. “You can’t raise it on everyone in one year.” 

Hamilton is undecided on the potential of an increase to fund projects. She acknowledged the value of some of the projects now gathering support among town board members but also stressed the hardship tax hikes place on citizens. 

“I don’t have all the answers, and I’m still open to listen to the other board members about how they feel,” she said. 

The board also contains some staunch opposition to any kind of tax hike outside of what’s needed to stay budget-neutral. 

“I don’t support anything except enough to cover the loss,” Hensley said. “That’s the only way I know to say it.”

Commissioners will gather for a work session at 8:30 a.m. Thursday, April 28, to discuss the issue, driving toward completion of a draft budget May 5. 

“I know we’re going to have to raise taxes,” Hamilton said, “but that’s when we’re going to have to hammer out how much.”

 

 

Impact of a revaluation

When property values went down after the economic crash, tax revenues resulting from the diminished values went down. As a result, Sylva and Jackson County are looking at upping their property tax rates to make up for the shortfall. There is not currently discussion of a tax increase in Dillsboro, Webster or Forest Hills. 

                                       Jackson County               Sylva

2008-2015 tax rate      28 cents per $100              30 cents

2016 (projected)               35-36 cents                36-37 cents

 

What they said

“We have dipped into the fund balance one too many times, and it is time to get back on track. I support an additional increase to move forward on some of the projects we have long put off. I will be conservative in that increase, but we have to start somewhere.”

— ­Commissioner Mary Gelbaugh 

“I know people don’t like to hear, ‘Your taxes have to go up,’ but with the revaluation we knew we would have to. I don’t want to hurt anybody, but I also think that if they want services provided we have to come up with the money from somewhere, and I just don’t feel we can use fund balance as a piggy bank to balance our budget. I just don’t think that’s being fiscally responsible.”

— Commissioner Barbara Hamilton

“I’ll support a modest tax increase to cover the losses that we’re going to incur because of this revaluation, they’re going to have to cover the whole town, but I don’t believe in raising them above what’s needed, and that’s been my stance all the time. I feel the taxpayers are hounded enough by both the county and the city.” 

— Commissioner Harold Hensley

“It’s going to be somewhere between 35 and 37 (cents) to stay revenue-neutral and pay for all the things we had promised to pay for, and that’s not really getting anything that this board wants accomplished, accomplished.” 

— Commissioner Greg McPherson

“What I’m looking at right now is an increase to remain revenue-neutral from the property revaluation and an increase to cover the money we’ve been taking from fund balance every year … Services have been cut to the extent they can’t be cut anymore.”

— Commissioner David Nestler

“We need to be forward-looking and not taking from savings.”

— Mayor Lynda Sossamon

Contact information for commissioners is online at http://bit.ly/1NlsHxJ.

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