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Paying for capital plan a big issue in Charlotte mayoral campaign

One of the biggest issues in this fall’s mayoral debate has been the recently passed $816million capital spending plan, paid for with a 7.25percent property tax increase.

Democratic candidate Patrick Cannon, who voted for the capital plan, said it will create thousands of jobs and help revitalize struggling neighborhoods.

His opponent, Republican Edwin Peacock, has not criticized the concept of having a capital program, but has instead argued the city could have created a capital program that didn’t require a tax increase.

But Peacock hasn’t outlined how large of a Capital Investment Plan he would support and how he would pay for it without raising new tax revenue. Peacock, a former City Council member from 2007-2011, declined to say which programs in the CIP he would support and which, if any, he would cut.

“It is a faulty premise to imply that the only way to fund a CIP is by raising taxes,” Peacock said in a statement to the Observer. “I'll leave it to my opponent to argue in favor of each project he supported and why it was necessary to raise taxes in order to fund these projects.”

Peacock has said many Charlotteans can't afford the tax increase, which comes two years after a flawed property revaluation by Mecklenburg County.

The 7.25percent property tax increase means the owner of a home with a taxable value of $200,000 will pay an additional $63.40 in city taxes a year.

For years, the City of Charlotte was able to fund capital programs without having to raise the property tax rate. That was due to the city’s explosive growth, which meant new tax revenue was pouring into city coffers. The 2013 tax rate increase was only the third time the city raised the tax rate in 28 years.

But former City Manager Curt Walton said last year the city had entered a new era, which he said would require more frequent tax hikes if the city wanted to continue building roads, sidewalks and other infrastructure as it had in the past. Republican council member Warren Cooksey agreed with Walton’s prognosis.

Cooksey said the city could have an $816million CIP without a tax increase, but that would require what he called in an interview “severe” budget cuts.

(Cooksey voted against the CIP in June. He wanted voters to have the ability to approve the property tax increase, just as they will be asked to approve bonds for the CIP.)

Deep cuts proposed

The 7.25percent tax increase is expected to generate about $27million this year. That’s a little under 6percent of the city’s general fund, most of which pays for police and fire protection.

In the 2011 mayoral campaign, Republican candidate Scott Stone suggested cutting $72million from the city’s general fund, without affecting police and fire. At the time, Peacock, who was a council member, questioned whether the city could sustain such a deep cut.

“I’m not certain all of his facts add up,” Peacock said during the campaign.

Having to cut $27million is far less than cutting $72million. But city budget director Randy Harrington said it would be very difficult for the city to cut that much annually to pay for debt service on the budget.

The most expensive city department in the general fund is police, which will cost $212million this year. The fire department is the next most expensive, at $107million. After that, solid waste costs $48million and transportation costs $21million.

The city this year will spend $6.5million on 2percent raises for all employees. The city could forgo raises through 2020 but would still have to cut about $20million to $21million to cover the debt service on the CIP, Harrington said.

“You would have to have a conversation about a reduction in services,” Harrington said.

In a statement to the Observer, Cannon said he wouldn’t support that.

“Sadly, I think we would be cutting important areas such as public safety, road and neighborhood improvements, the creation of 18,000 jobs and public-private business development opportunities, to name a few,” Cannon said.

Alternative actions

There are other options:

• The city could shrink the size of the CIP.

It’s unclear what programs Peacock would keep or cut if he had the chance. Cooksey said most of the CIP is traditional meat-and-potatoes infrastructure the city has typically built, such as roads, sidewalks, better traffic signals, affordable housing and neighborhood improvements.

The streetcar was removed from the CIP by City Manager Ron Carlee this year.

There are some projects, however, that are less traditional. For instance, the city has budgeted $25million to renovate Bojangles Coliseum into an amateur sports complex. In addition, the CIP sets aside $20million to leverage a possible “public-private partnership” for the east side.

Other cuts could include $35million for a 26-mile bike and pedestrian trail that will be built across the county.

Some of these cuts were proposed in 2012, under a budget that was passed by council members but later vetoed by former mayor Anthony Foxx. That CIP would have cost roughly $650 million and would have been funded with a 5.6 percent property tax increase. Cannon voted for that plan.

• The city could use some reserve funds.

This year, Carlee announced the city could spend $63million on a streetcar by tapping several reserve funds, including $25million in unused debt capacity.

At the time, some council members suggested that all of that money go toward the capital plan, which would reduce the size of the tax hike needed.

That could be done, although it might not reduce the tax increase by a large amount. Harrington said if the $25million in unused debt capacity were used to pay down CIP debt, the 7.25percent tax increase could have been reduced to 7percent.

$87.5 million for stadium

Earlier this year, the City Council approved giving the Panthers $87.5million for stadium improvements.

That money could have lowered the property tax increase, though the General Assembly would have had to give the city permission to use it for a capital program.

The Panthers money was originally slated, by law, for the Convention Center. But legislators gave the city permission to use the hospitality tax dollars for the Panthers.

Harrison: 704-358-5160
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