A majority of Alamance County’s commissioners ultimately decided to ramp up the county’s property tax rate in order to provide the Alamance-Burlington school system with some more funds in the new fiscal year. But this politically perilous move wasn’t exactly the first choice of the county’s governing board to meet the school system’s financial needs.
During the course of a three-hour meeting on Monday, the board of commissioners explored a number of other possible ways to accommodate the eleventh-hour request they received from the school system’s superintendent.
Sales taxes
Among the options they considered was a potential increase in the county manager’s sales tax projections, which were considerably lower than those used by the county’s cities and towns. In fact, this very idea was recently proffered by an editorial in The Alamance News, which argued that county manager Heidi York had been overly cautious when she estimated the county’s sales tax receipts would go up a mere 7.7 percent in the new year – as opposed to the 20 percent or so anticipated by city managers in Mebane and Graham.
In response to the newspaper’s proposal, commissioner Steve Carter asked York to explain why the county’s sales tax projections are so low relative to its municipalities. The county manager went on to recall that counties, unlike municipalities, are hamstrung by a longstanding “hold harmless” agreement that the state implemented years earlier when it took over the responsibility for Medicaid from county governments. She also alluded to another, more recent concern about the robustness of the county’s sales tax receipts:
“For the past – I don’t know – three to four months, our sales tax numbers have not met our budget targets,” she told the commissioners. “They have come in short – consistently. So that has not been a source I’d recommend tapping for these needs.”
Carter went on to argue that York’s explanation had effectively demolished the newspaper’s suggestion.
“One of our favorite news sources has been fond of attacking our county manager because she has been lower on sales tax projections than the municipalities,” he declared. “Now, they have a reason to understand why she was being so conservative.”
Even so, Carter proposed that the commissioners another of the very things that the newspaper had urged in order to reduce its reliance on property taxes. He also broached a potential increase in the budget’s reliance on its accumulated savings, or fund balance, as an alternative to a higher sales tax projection.
“Either fund it from the fund balance or fund it with an increase in the sales tax projection,” he said.
Carter added that, in the event that York’s worst fears come to pass, the county could still count on its ample financial reserves to make up any shortfall in sales taxes. He noted that the county’s usable funds are currently tantamount to 22 percent of the county’s annual outlays, as opposed to the 20 percent that the commissioners had previously set as their target.
Fund balance
Meanwhile, the county’s well-provisioned piggybank struck commissioner Bill Lashley like a perfect solution to all of the board’s budgetary aggravations.
“How ‘bout taking it out of the fund balance?” he proposed. “It just seems like the easiest, cleanest way.”
John Paisley, Jr., the chairman of Alamance County’s commissioners, tried to disabuse his colleagues of the idea that the fund balance is a bottomless source of revenue for the county’s financial needs. Paisley recalled that, nearly a decade ago, when he briefly held an appointed post on the board of commissioners, the county found itself in dire straits due to overuse of the fund balance. He added that these bad old days could return if the commissioners aren’t more frugal with the county government’s savings.
“I think it’s very dangerous,” he added. “Our 22 percent sounds like a lot, but it really is not.”
In the meantime, Lashley suggested that the county’s financial dilemma may simply resolve itself based on the specifics of the state’s next annual budget. He argued that the General Assembly could pass a spending plan with a few spillover increases for the school system, which would more or less resolve the superintendent’s financial current angst.
“I think if we wait for those numbers to come in,” he added, “the impact on the county could be less.”
Lashley went on to suggest that the county should offer the school system a pledge to take whatever action is needed to meet its financial needs once the state’s budget has been adopted. His proposal fell flat with Susan Evans, the county’s finance director, who discouraged the commissioners from gambling their own financial future on developments outside their control.
In the end, a majority of the commissioners seized on a much less risky proposal floated by commissioner Craig Turner, who had previously been the board’s most adamant supporter for a so-called revenue neutral tax rate that would wipe out the county’s financial gains from its most recent property revaluation.
Over the past several weeks, Turner had proposed a host of budgetary revisions in the hope of securing this break-even rate of 42.59 cents for every $100 of property. On Monday, however, Turner acknowledged that the best he reasonably suggest was a rate of 43.2 cents given the school system’s last-minute request for additional funds.
“I have in the last two weeks poked and prodded and looked under every rock in our budget, and the big savings just aren’t there,” he told his colleagues before a majority of the board enshrined his recommended rate of 43.2 cents in the county’s new budget.
Addendum on assessment of sales tax revenue
After Monday night’s meeting, The Alamance News asked the county for the figures that the county manager had consulted to reach her relatively bleak conclusions about the county’s sales tax receipts. In response, Susan Evans, the county’s finance director, provided a month-by-month breakdown of the county’s sales tax proceeds for the past two fiscal years, along with monthly comparisons to the overall trend for the state.
These figures show that, relative to the previous year’s totals, the county had, indeed, seen a drop-off in its sales tax proceeds from January, February, and March of this year –which are the last three months on record due to a consistent delay in the state’s sales tax distributions. According to these numbers, the county’s receipts fell off by .06 percent in January, 4.43 percent in February, and 3.49 percent in March relative to the same periods of 2022.
Although the total haul for the current year is still up 4.69 percent from the same point in the previous financial cycle, the county nevertheless appears to be lagging behind the rest of the state in its sales tax receipts. According to the finance director’s stats, the county’s monthly collections fell short of the state trend for nine of the past ten months – with the revenue for January, February, and March coming in 7.60, 5.43, and 9.49 percent below the comparable state figures.
