Sunday, July 14, 2024

114 West Elm Street
Graham, NC 27253
Ph: 336.228.7851

Why can’t county commissioners get to revenue neutral?

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We don’t understand the county commissioners’ action this week in seemingly deciding to walk away from further decision-making just as they were about to get to the “promised land” of a revenue neutral tax rate.

The commissioners were within .41 cents, or the equivalent of about $1 million in revenue, of this elusive figure on Tuesday when chairman John Paisley, Jr. declared a 43-cent tax rate was, in essence, good enough. (The revenue neutral rate has been pegged at 42.59 cents per $100 valuation.)

And, we concur that it is better than where county manager Heidi York’s  irresponsible budget started last month, with a whopping 2.84-cent tax increase (more than $7 million) above the revenue neutral standard. We’ve observed before: she must have been tone-deaf to sit in the same room with the commissioners as they had pontificated for months about their desire to adopt a “revenue neutral” tax rate and then propose the whopping increase that appeared in her suggested budget.

Still, we wonder, like commissioner Craig Turner did after Tuesday’s debacle, why the rest of the commissioners won’t finish the job.

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It seems to us there are several obvious and fairly easy solutions to this dilemma.

We continue to believe the county should jettison all payments to non-profit agencies.  Funding these agencies is a pattern with which we’ve consistently disagreed in the past; the tendency to subsidize these groups and more of them each year continues and expands.

This is not a proper function for local government.  But somehow, it’s always easier to be generous with someone else’s money, so taxpayers end up footing the bill for the commissioners’ “generosity.”

The commissioners could easily freeze filling certain non-essential posts which would also go a long way in closing the gap between spending and taxing.

But there are two much more easy ways to finish the job of getting to revenue neutral.

First of all, the commissioners should revisit the county manager’s assumptions about future sales tax revenues.  York has estimated that the county’s sales tax receipts will increase by just 7.7 percent in the next fiscal year – which is the lowest sales tax projection among all of the local governments in Alamance County, most of whom have estimated an increase of over 20 percent.

It would only take a slightly more optimistic outlook for sales tax revenues to wipe out the remaining county tax rate increase.

Local governments have often underestimated sales tax revenues – deliberately, in our judgment – in order to understate revenues and put more emphasis on property taxes.

But when the sales tax receipts pour in over and above the budgeted estimates, these same bureaucrats use that as a justification for a mid-year spending spree, since the “extra money” is portrayed as a windfall.  In fact, it was always part of a calculated misrepresentation to squeeze more money out of the taxpaying citizens.

Secondly, we acknowledge that it has been a long-standing budget gimmick among local governments to designate more revenues from their accumulated savings, or “fund balance” – at least on paper – whenever they’re confronted with a shortfall in revenues.

Similarly, governments often claim to use “fund balance appropriated” as a paper maneuver to balance their budgets.

The “fund balance” is each government’s “savings account,” and these are inevitably growing.  The proceeds of excessive taxation (especially from higher-than-needed property taxes) are funneled into these savings accounts, which is then treated as somehow sacrosanct from being used.

At a meeting of Graham’s city council this week, for instance, one chart showed how much fund balance recent city managers have allocated from the fund balance over the past several years in each of their proposed annual budgets.

But when pressed by this newspaper’s publisher, officials ultimately produced the city’s most recent audit, which revealed that in the 11 most recent fiscal years, not a dime had actually be drawn from the fund balance in any fiscal year – even though as much as $2.2 million (more typically around $1.5 million) had been reserved, or set aside, for that purpose.

Our commendations to Graham mayor Jennifer Talley, mayor pro tem Ricky Hall, and councilman Joey Parsons for being willing to trim spending, and cut the tax rate to revenue neutral.  Council members Bobby Chin and Bonnie Whitaker were willing to do some trimming of spending, but would not cut the revised (but still high) tax rate hike that city manager Megan Garner was recommending.

This “fund-balance-appropriated” strategy is sort of a paper exercise that local government managers often use to show their governing boards how their budgets were made to “balance.”

In no instance that we can recall has any jurisdiction had to dip into its fund balance for more than was budgeted. In many cases, their usage of savings is considerably lower than estimated – and sometimes, as has occurred in Graham for the last 11 years running, they haven’t needed to dip into it at all.

On the contrary, the fund balances almost everywhere continue to grow – which we regard as an ongoing testimony to how governments are overtaxing their residents in order to store up money for future spending sprees.

In the county’s case, for instance, the most recent audit points out that the revenues received by the county came in at $26.8 million over expenses for the fiscal year that ended on June 30 of 2022 and $20.8 million over expenses in the year before that. Moreover, for the fiscal year ending June 30, 2022 (the most recent for which information is available), not a penny of the $16 million in  “fund balance appropriated” was actually used. Instead, the fund balance grew – again.

We don’t see why commissioners can’t honor the promises they’ve been making for the past six months or more to adopt a revenue neutral rate in order to counteract the increases in tax values that came out of the county’s latest property revaluation.

Taxpayers will already need to be reminded, probably repeatedly, that “revenue neutral” is a cumulative concept, not an individual one.

Even with a revenue neutral rate, there will be many individual taxpayers who will inevitably end up paying more in property taxes than they did last year.

The concept of revenue neutrality is, after all, one that applies to the entire tax base so that the average taxpayer is effectively held harmless – although some will pay more, and others a bit less.

But for every half a cent (or .41 of a cent) that the commissioners add to the revenue neutral number, a greater number of county residents will see their property tax burden go up – adding to their level of dissatisfaction with the property taxes they’ll be asked to pay if commissioners fail to honor their promises.

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