Tax administrator estimates future break-even tax rate of 43 cents, down from current rate of 65 cents

“So, the likely range we’re going to end up with in is anywhere from 42.5 cents to 42.5 cents. If someone pressed me what revenue neutral is, I would say 43 cents…But, by the time you set the budget [he told the county commissioners on Monday], it’s not going to be a range, it’s going to be a [firm] number.” – Alamance County tax administrator Jeremy Akins

 

The head of Alamance County’s tax office is predicting that the county’s property tax rate may need to come down by roughly a third in order to wipe out the gains in tax value from the county’s latest property tax revaluation.

The county’s tax administrator Jeremy Akins has consistently stressed that a “revenue neutral,” or break even, tax rate will ensure that the recent revaluation, which was meant to recalibrate tax values last set in 2017, doesn’t instead become a sly way for the county to enrich itself at the taxpayer’s expense.

Akins was nevertheless reluctant to hazard a guess about where this rate may ultimately settle when he announced the revaluation’s results to the county’s board of commissioners two weeks ago.

At the time, Akins told the commissioners that the revaluation’s 79.43-percent bump to the county’s tax base would warrant a substantial change to the current tax rate of 65 cents for every $100 of property. Yet, he hesitated to venture a precise figure for the new revenue neutral rate until he had a better grasp on the impact of all the appeals that he expected property owners to file once they received their new tax assessments from the county’s tax office.

By all accounts, Akins and his colleagues have been inundated with calls from the public since they began to distribute these new values to individual property owners last week. At this point, the tax office hasn’t concluded whether hue and cry will have a discernable effect on the post-revaluation appeals process.

Yet, in the wake of this public clamor, Akins was at least willing to make some cautious projections this week about the new, break-even rate when the board of commissioners held its annual retreat at the main campus of Alamance Community College on Monday.

During the board’s seven-hour gathering, the county’s tax administrator explained some of the calculations that he’ll eventually use to pin down the county’s new revenue neutral tax rate. Under state law, the county must publicly announce this rate regardless of whether the commissioners ultimately adopt it as part of the county’s next budget.

But as for the calculations themselves, Akins told the commissioners that he already has most of the raw data he’ll need – with the exception of the impact that successful appeals will have on the post-revaluation tax base.

Akins went on to crunch the numbers based on two different appeals scenarios. In one scenario, he assumed that successful appeals would lower the overall value of the tax base by 2.5 percent, which he said would indicate a rather well-done revaluation. In the other, he relied on a more “conservative” adjustment of 5 percent. He went on to add that, with a 2.5 percent reduction, the county would need a tax rate of 42.59 cents to break even after the revaluation, while at 5 percent, it would have to set the rate at 43.51 cents.

“So, the likely range we’re going to end up with in is anywhere from 42.5 cents to 43.5 cents,” he went on to inform the commissioners. “If someone pressed me what revenue neutral is, I would say 43 cents…But, by the time you set the budget, it’s not going to be a range, it’s going to be a [firm] number.”

 

Potential additional considerations

Akins emphasized that, in both these scenarios, he factored in a year’s worth of new construction and “natural growth” in the tax base to make sure that the new revenue neutral rate will bring in the same amount of revenue that the county would’ve raised under the old rate if the revaluation had never occurred. He distinguished this approach from merely calculating the rate needed to meet the current year’s property tax receipts, which are about $3.4 million less than the revenues with natural growth factored in.

Akins said that, in addition to accounting for natural growth, he could’ve also increased the target revenue by an additional $3.9 million to reflect the effect of inflation. He added that this sort of “inflation neutral” calculation would edge up his estimated break-even rates to somewhere between 44.13 and 45.08 cents, depending on the impact of post-revaluation appeals.

“I’m not advocating inflation neutral,” he went on to inform the commissioners. “But I want you to know what revenue neutral is and isn’t.”

Akins went on to add that residents who have legitimate gripes with their newly assessed values can contact the tax office at 336-570-4068 to schedule a formal appeal. He added that, in order for an appeal to succeed, the property owner must present evidence to substantiate that the tax office either erred in its assessment or that it failed to consider factors like unheated square footage or a recent sale in the neighborhood, which may have an effect on the tax value.

The commissioners, for their part, have previously declared their intent to adopt the new revenue neutral rate in the county’s next annual budget. The commissioners generally reiterated this commitment on Monday. Even so, commissioner Bill Lashley suggested that he and his colleagues may want to round this figure up to the nearest whole cent to ensure that they don’t hamstring the county with an inadequate tax rate, as a previous board of commissioners did following another revaluation in 2009.

“We’ll probably be shooting for 44 cents,” he went on to add, “if we want to bring in 100 percent of what we had last year.”


Read other stories from Monday’s county commissioners’ retreat:

Using school system’s capital needs fund to finance court construction listed as option by consultant: https://alamancenews.com/county-eyes-school-systems-capital-reserves-to-pay-off-debt-for-courthouse-expansion/

County kicks off budget season with 7-hour day retreat: https://alamancenews.com/county-kicks-off-budget-process-with-full-day-retreat-at-acc/