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Charlotte budget outlook has small tax rate hike

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TODD SUMLIN - tsumlin@charlotteobserver.com
City Manager Ron Carlee

More Information

  • Commissioners chair wants no tax hike in 2014-15
  • New city roles

    City Manager Ron Carlee also announced Thursday the responsibilities of his newly formed executive committee.

    Deputy City Manager Ron Kimble will be tasked with economic development.

    Assistant city managers will have the following areas: Debra Campbell, transportation; Eric Campbell, public safety; Ann Wall, housing and neighborhood development; Hyong Yi, environment.

    Wall and Yi are new to the city. Carlee hired them in early January. Steve Harrison



WINSTON-SALEM The city of Charlotte tentatively plans a 1.7 percent property tax rate increase for the coming year to make up for money lost because of Mecklenburg County’s continued revisions to its flawed 2011 property revaluation.

As property owners have successfully appealed tax values to their homes and businesses, the amount of revenue to local governments is dropping slightly. The city expects it may need to make up $4.8 million because of lower property values.

City staff stressed that the tax rate increase – if approved by the City Council – would be “revenue-neutral” and not meant to expand government.

But it would come on the heels of a 7.25 percent tax rate hike approved in June 2013 that will fund an $816 million capital program that will build roads, sidewalks, affordable housing, neighborhood improvements and other projects through 2020.

City Manager Ron Carlee said Thursday that he hasn’t made a final decision on the tax rate or budget. He said, “All options are on the table.”

The owner of a house with a tax value of $200,000 saw the city tax bill increase by $63.40 last summer. If the 2014 tentative increase is approved, and the home value stays the same, that same homeowner would pay an additional $16 starting in July.

If a homeowner’s tax value increases, the jump would be higher. If a home falls in value, the owner could pay the same or less.

City staff and council members discussed the 2015 fiscal year budget Thursday at a retreat at the Graylyn Conference Center in Winston-Salem.

Budget director Randy Harrington said the city is still in tight budgets because of the lingering effect of the recession that started in 2008.

In the past five years, the city’s population has grown by 5 percent, and inflation has been 2 percent during that time. Harrington said the operating expenses for the city’s largest departments – which include police, fire and solid waste – have grown 1.5 percent.

Even with the small tax increase, the city’s early look at the fiscal year 2015 budget shows a $6.4 million deficit. Revenues are expected to be $574.5 million for the general fund, and expenses are penciled in at $580.9 million.

A projected deficit of that size – 1.1 percent – isn’t uncommon in January, five months before a final budget vote is scheduled to be adopted.

But the deficits in future years are projected to grow. By fiscal year 2018, the city’s projected deficit is $31.4 million, or 5.2 percent of revenues.

That suggests a new property tax increase might be necessary by the end of the decade. City officials have warned for several years that the city’s growth is slowing and that tax revenues are not flowing into the city as they were in the 1980s, ’90s and 2000s.

Last year’s tax increase was the city’s third rate increase in 25 years.

• The early budget outlook includes a 3 percent raise pool for workers other than public safety employees. That is one of the largest raises since the recession started. In two years, the city had a salary freeze.

“We are trying to make up for those losses,” Harrington said.

Public safety employees are covered under a previously approved pay plan. That includes a 1.5 percent market rate adjustment and step increases of 2.5 or 5 percent, depending on an employee’s seniority.

Council member John Autry, a Democrat, suggested that the raise pool for regular employees includes a base raise that all employees would get, regardless of performance.

• The city needs a new fire ladder company for the areas around Northlake Mall and the old Eastland Mall site to improve response times, Carlee said.

• The budget outlook could include an additional $2.5 million for street resurfacing. That would allow the city to resurface 15 miles in addition to the 62 miles it repaves annually. The city also said it needs to replace numerous parking meters.

• The early forecast calls for an additional $300,000 to $500,000 to plant new trees. That is part of the city’s goal of having a tree canopy covering 50 percent of the city by 2050.

In its presentation Thursday, the city said it expects to have $24.7 million in savings from its $816 million Community Investment Plan, which was funded with last year’s tax rate increase.

Mayor Pro Tem Michael Barnes, a Democrat, asked whether those savings could be used to fill this year’s budget gap rather than raising taxes.

“It appears we are in a position of running deficits,” Barnes said. “Some of this spending needs to be curtailed. All I’m seeing is growth in the general fund and growth in spending.”

Carlee said he recommended against using the capital program savings. He and Harrington said it wouldn’t be prudent to use one-time savings for recurring costs.

“Aspirational cities will always have big numbers,” Carlee said. “They can’t do everything. It’s a matter of prioritization. Our difficulty will be making choices in priorities.”

The controversial streetcar wasn’t a part of Thursday’s budget discussion. On Monday, council members voted 9-2 to spend up to $12 million on engineering work for a second leg of the streetcar, from Johnson C. Smith University to the Elizabeth neighborhood.

Carlee has proposed using $63 million in city reserves to build the second streetcar leg. The city hopes to secure a $63 million federal grant to pay for the 2.5-mile extension.

The city hasn’t identified a way to pay for the operating costs for the streetcar, whose first segment is under construction.

The City Council will hold three budget workshops: Feb. 26, March 19 and April 9.

On May 5, Carlee will present his recommended budget. Council members are scheduled to vote June 9 on a budget for the fiscal year starting in July.

Harrison: 704-358-5160
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