Wednesday, July 17, 2024

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Will county’s fire districts have ‘revenue neutral’ tax rates?

Alamance County’s leaders have declared their commitment to “neutrality” – to revenue neutrality, that is – in order to salve the anxiety that many residents feel over the county’s latest property tax revaluation.

In light of the nearly 80 percent bump that the revaluation has given the county’s overall tax base, the commissioners have publicly announced that they’ll pare back the county’s property tax rate to a “revenue neutral,” or break-even, level that will largely wipe out the revaluation’s impact on individual tax bills.

But this pledge on the part of the county’s governing board doesn’t extend to the additional levy that rural residents must pay on top of their county property taxes to fund the semi-independent fire departments which serve their communities.

Property owners in the county’s 12 rural fire districts are currently billed between 9 and 14 cents for every $100 of property value to support the operations of these departments. These tax rates, which appear in the county’s current annual budget, were originally established by the county’s board of commissioners based on recommendations from the rural fire districts themselves.

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In some cases, these recommendations came from the municipal leaders in towns like Haw River or Elon, whose fire departments also serve rural property owners in outlying areas. In other instances, the rates were proposed by the governing board of each district’s fire department after a hearing where the district’s property owners could weigh in on the size of their potential tax burden.

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At their current levels, the tax rates in each district would substantially increase the average resident’s tax obligations in light of this year’s revaluation, which recalibrated assessed tax values to match the local real estate market for the first time since the county’s previous revaluation in 2017.

As previously noted, Alamance County’s commissioners have preemptively committed themselves to a revenue neutral tax rate in order to offset the increase in property values. But the board’s members haven’t imposed a similar requirement on the county’s fire districts – at least not at this point in the budget process.

John Paisley, Jr., the chairman of Alamance County’s commissioners, conceded that the county’s governing board will ultimately be responsible to review and vote on the new, post-revaluation rate for each district. He added, however, that it remains very much an open question whether these districts will follow the lead of the commissioners and recommend a rate low enough to neutralize the revaluation’s results.

“I’ve had plenty of requests both ways,” the commissioners’ chairman said in an interview Tuesday: “‘I don’t want to pay more taxes’ and ‘we want the same rate – with the revaluation.’”


Crunching the numbers
Shortly after it implemented the revaluation’s results in January, the county’s tax office calculated the revenue neutral tax rate for each of the 12 fire districts along with the revenue this figure is expected to reap if it’s ultimately adopted as the fire district’s new tax rate.

The county’s office has also ascertained the tax rate that each district would need in order to keep up with a 7 percent rate of inflation. The tax office ultimately shared these “inflation neutral” numbers, along with their revenue neutral counterparts, with the top brass in each fire district in February.

In order to determine the revenue neutral tax rate for each fire district, the tax office used a formula dictated by the state that multiplies the district’s pre-revaluation tax revenues by a number that’s supposed to represent a year’s worth of “natural” growth in the tax base. The resulting figure is meant to approximate the revenue that each district would get in the new fiscal year had the revaluation never occurred. In some cases, however, the state’s formula spits out a unrealistically high growth rate – as it apparently did when the tax office crunched the numbers for the 54 East fire district.

According to the county’s tax office, the revenue neutral rate for this particular district would generate some $599,446 in the new fiscal year – nearly 12 percent more than the district took in this fiscal year using the county’s pre-revaluation assessments. This putatively “revenue neutral” haul is also higher than the district’s potential receipts under the inflation neutral tax rate which the tax office deduced.

The county’s tax administrator Jeremy Akins conceded that 54 East is a bit of an outlier compared to the other rural fire districts, whose revenue neutral receipts sit comfortably between their inflation neutral projections and their pre-revaluation revenues.

“They’re an odd ball,” Akins said in an interview Wednesday. “Their growth rate outpaced inflation, and that was quite a surprise for us.”

In the end, the tax office passed these figures along to officials in 54 East when it notified the rest of the fire districts of their respective revenue and inflation neutral figures. These numbers are replicated in the accompanying table along with pre-revaluation baselines for each of the 12 districts.

[Story continues below chart with fire district tax rate information.]


Debate ignites in Elon
In the meantime, the onus has been on the leaders of each fire district to determine precisely which tax rate they’ll propose to the county’s board of commissioners when they submit their budgetary requests for the new fiscal year.

In Elon, the deliberations over the new tax rate began in earnest this week with a somewhat inconclusive discussion among the members of Elon’s town council.

During their latest regularly-scheduled meeting on Monday, the members of the council entertained a request for a public hearing that would allow residents in the outlying fire district to chime in on the size of their post-revaluation levy.

Since 2020, property owners outside of Elon’s municipal limits who are nevertheless served by the town’s fire department have been required to pay a 12-cent surcharge on every $100 of property to cover the cost of their fire protection.

According to Elon’s town manager Richard Roedner, this 12-cent rate is expected to add $323,714 to the town’s coffers in this fiscal year. Roedner conceded that, next year, this rate would reap a considerable windfall for the town given that the fire district’s tax base rose from $273.4 million to $413.4 million in the revaluation.

In a memo to the council prepared before the meeting, Roedner noted that a revenue neutral rate of 8.07 cents would still bring in $330,420 to support the town’s fire department. He nevertheless added that a slight increase beyond the revenue neutral rate could provide some additional revenue to counteract the high rate of inflation over the past couple of years.

Roedner went on to propose an escalating series of rates to make up for a portion of this inflation, which he added has amounted to about 14 percent in two years. He said that a tax rate of 8.62 cents would wipe out half of the inflationary increase, while generating $356,264 a year for the town’s fire department. At a rate of 8.72 cents, the town would bring in $359,593 – enough to cover 8 percentage points of inflation. Meanwhile, a 9-cent rate would provide $372,075 and cover for an inflation level of 12 percent.

Roedner ultimately suggested that the council hold a public hearing on April 25 to let the fire district’s residents share their own thoughts about these various options. He acknowledged that the council could, in theory, pass this responsibility off to the board of commissioners, although he added that the council had conducted the hearing itself in 2020, when it had asked the commissioners for a 1 cent increase in the fire district’s tax rate.

“Last time, it was right after I started,” he added, “and, honestly, I didn’t realize we had an option.”

The council, for its part, seemed inclined to conduct the state-mandated hearing itself.
“My feeling is that I would like to hold it here,” said councilmember Stephanie Bourland, “because it is our decision, and I would just personally like to hear it as a council.”

“For me personally, I would like to hear from [the district’s residents] – if anybody shows up,” agreed Elon’s mayor Emily Sharpe. “But I would be surprised if they did.”

In the end, the council opted to wait until next week to schedule the hearing so that Roedner could write up a resolution which summed up the outcome of Tuesday’s discussion.

Read the newspaper’s editorial page opinion on fire district tax rates:

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