Graham’s city council reached a consensus this week to have the city’s staff include a 3-cents tax increase in the budget for the upcoming fiscal year in order to finance the construction of a fire substation and several other big-ticket projects.
City officials have previously identified four priority capital improvements within the general fund (which uses property taxes and other revenues to pay for core city services) that they say will be needed within the next five years.
The four priorities include: construction of a fire substation to improve emergency response times in the southern part of the city; the purchase of an additional fire truck; street resurfacing; and the design for Graham Regional Park along North Jim Minor Road.
A consultant hired to analyze the city’s ability to fund the projects had outlined multiple options for the general fund projects earlier this month. Each of the six “scenarios” that the consultant presented earlier this month carried an upfront increase in the city’s property tax rate, which ranged from a low of 1 cent to a high of 3.19 cents per $100 of valuation.
During a special meeting Monday afternoon, Graham’s city council agreed by consensus to plan for the option that will cost just under $22 million over the next five years. That amount would pay for: construction of a $6 million fire substation; a $1 million fire truck; $4.1 million over the next two fiscal years to design the park; boosting annual funding for capital improvements from $1.4 million to $7.1 million; and $3.75 million for street resurfacing.
Though the $22 million option initially would’ve required a 2.79-cents increase in the municipal tax rate for the 2026-27 fiscal year that begins July 1, during Monday’s discussion, mayor pro tem Ricky Hall suggested rounding up to a 3-cents tax increase.
The $22 million option that the council agreed to by consensus on Monday calls for financing $7 million in debt and using just under $15 million in “pay-go/reserve” funding, the latter of which includes the allocation for capital projects within the yearly budget and unassigned fund balance (i.e., “rainy-day” savings).
Graham had $11.3 million – or the equivalent of 56.5 percent of the total general fund budget – in unassigned fund balance as of June 30, 2024, the latest period for which the most recent financial audit had been completed when the consultant presented his analysis earlier this month.
Each additional penny on the tax rate generates $270,000 in revenue for the city, the consultant, Ted Cole of Davenport Public Finance, told the council during a subsequent discussion Monday afternoon. “If you went to an even three pennies, you would be getting about $50,000 [in additional revenue] a year,” he said.
[Story continues below graphic with tax and spending options.]
The 3-cents hike would increase the city’s property tax rate from its current level of 30.99 cents to 33.9 cents per $100 of valuation for the upcoming fiscal year, based on figures cited during the council’s discussion.
“That would be a net new three pennies on the tax rate, and that would be needed for at least the next four years or five years,” Cole said.
The council could consider a gradual reduction in the city’s tax rate around 2031, the consultant said Monday, adding, “I also expect you’ll need to be doing other capital [projects] in those years.”
The 3-cents increase would tack on an additional $60 per year to the city’s property tax bill for a $200,000 home, or an additional $90 to the tax bill for a $300,000, Cole said.
While several council members expressed reservations about increasing the tax rate, they suggested that the need to build a fire substation and complete other capital improvements is unavoidable.
Hall: Tax increase a ‘necessary evil’ to pay for projects
“Personally, I hate raising taxes, but sometimes, it’s a necessary evil to pay for the services, and we can’t keep kicking the fire station down the road,” said Hall.
Mayor Chelsea Dickey pointed out that Graham has the lowest municipal rate among similarly-sized cities within Alamance County. “Haw River, Green Level, [and other smaller municipalities] don’t offer services of our size,” she said.
The closest comparison within the county is Mebane, which has a current property tax rate of 37 cents per $100 of value and 20,654 residents, according to data from the U.S. Census Bureau (July 2024) and the Alamance County tax office.
By comparison, Graham has a 30.99-cents property tax rate and 19,311 residents, according to the Census Bureau and county tax office.
Whitaker: ‘I’m trying not to give everybody sticker shock’
“I’m trying to lower the tax rate and not give everybody sticker shock, because that’s going to be a big hit, especially [for] our senior citizens,” council member Bonnie Whitaker said Monday afternoon. “I was trying to get maybe a little bit lower, trying to do part, spread it out…It doesn’t make me feel better, but I get it – we’ve got to pay for stuff.”
Though Whitaker had asked about the feasibility of going with the third-cheapest option – which would’ve carried a 2.43-cents tax increase beginning July 1 – she pointed out that option included no funding to design Graham Regional Park.
Dickey: ‘We’re keeping you safe’
“If we’re increasing taxes,” Dickey said, “we’re increasing services so that our community can be taken care of.”
“We’re keeping you safe,” the mayor added, referring to the goal of ensuring that residents in southern Graham have the same emergency response times as other parts of the city. “We worked hard at identifying priorities for our community, taking into consideration they were going to come with price tags…That’s why I ran – taking care of our people.”
Councilmen Bobby Chin and Jim Young didn’t state their preferences for funding the projects or their thoughts about the upfront tax increase during Monday’s discussion.
Chin, however, had said earlier this month that it didn’t make sense to spread the cost to design the park over multiple years, as Dickey had suggested, saying that, based on his experience, “when you break it up, the cost never goes down.”
“What ends up happening is you start tweaking it,” Chin said during the earlier discussion, “and what you thought you were going to save ends up costing you more.”
More to come on how Graham plans to pay for $61.7M in water/sewer capital projects
Meanwhile, city manager Megan Garner said that the staff is still working with the financial consultant to develop options for water/sewer rates and other fees, as part of the schedule of fees that will be incorporated into the budget for the 2026-27 fiscal year.
The analysis the council heard earlier this month calls for a potential total of $61.7 million in water and sewer construction and upgrade projects that city officials say will be needed within the next five years. Those projects include: water and sewer line extensions, connections, and replacements ($30.1 million by 2031); sewer lift station upgrades ($6.7 million); water treatment plant design and upgrade ($21.6 million by 2031); and wastewater treatment plant projects ($3 million).
Approximately $48.6 million in water/sewer projects would be financed through debt, and $13.1 million would be in “cash funding,” based on Cole’s earlier presentation to the city council.
No vote was taken following the council’s discussion Monday afternoon.
Instead, the city council agreed by consensus to direct the staff to develop a general fund budget with a 3-cents tax increase for the 2026-27 fiscal year.
The council will still need to vote to adopt an annual budget, including the big-ticket capital projects and the annual tax rate, later this spring, prior to the July 1, 2026 start of the next fisca
