05/24/05 — Commissioners consider 10-cent tax hike

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Commissioners consider 10-cent tax hike

By Barbara Arntsen
Published in News on May 24, 2005 1:53 PM

Wayne County Commissioners received some bad news Monday. County Manager Lee Smith is figuring a 10-cent increase in the property tax rate in his proposed budget for 2005-2006.

The proposed budget is based on a tax rate of 76 cents per $100 valuation, up from 66 cents.

That means that the owner of a $85,000 home would be billed an additional $85 in county taxes.

Half of the money from the proposed tax increase would be placed in a capital reserve fund for school needs, to reduce the county's use of its fund balance, and to cover the increase in Medicaid costs, Smith told commissioners during a three-hour work session Monday.

Capital improvement programs for Wayne Community College and the county airport and increasing the economic development incentive fund would account for about 3 cents of the increase, Smith said.

The rest of the proposed increase would pay for equipment, a grant to match funds protecting land around Seymour Johnson Air Force Base, vehicles, fuel, and training.

The commissioners expressed little reaction during the presentation.

Commissioner Efton Sager said he had no comment, except that there were "too many questions at this point."

Commissioner Andy Anderson said that it was "a lot of material to digest."

Commissioner John Bell said he didn't understand why the board would be surprised about the proposed hike in taxes.

"Two years ago he (Lee Smith) told us where we would be today," Bell said.

The possibility of a hefty tax increase loomed before the county before Smith took the job as county manager in 2002.

During budget talks in 2001, former county manager Will Sullivan and Finance Officer Norman Ricks warned the commissioners about financial trouble ahead.

Commissioners chose not to raise taxes in 2001, for the eighth year in a row, and decided to balance the budget by appropriating close to $11 million from the county's general fund.

When Smith became county manager the following year, he found Wayne had reduced its general fund balance by almost $12 million over a three-year period.

Working with the finance office, Smith cut county expenditures by $6.2 million between February and June 2002, substantially reducing the amount of money the county would have to take from its savings. The county had to take about $3 million from the general fund that year, instead of the projected $9 million.

Smith said that fund balances in all counties grew in the late 1990s because state reimbursements for programs like Medicaid and Medicare were coming in well over estimate.

But those large reimbursements stopped, and counties were faced with offering more health services with less money.

Smith looked at the county's audit figures over a 10-year period and found that expenditures were growing an average of about $6 million per year.

Revenue growth was not keeping up with expenditures, he said. That trend had to be reversed or the county would end up in financial trouble, Smith said.

Revaluation two years ago added almost $3 million to the county's revenues, Smith said, which helped offset the original $9.5 million over budget expenses.

So, when planning for the next year's budget, he budgeted to use $4.2 million from fund balance, knowing the county would have to bring in revenues equal to that amount or risk draining its savings even more.

"By the next year we had brought in revenues to cover that amount, plus we added $25,000," he said.

For the last two years, the county has kept its fund balance even at $18.2 million by reducing general fund expenditures by 13 percent, cutting labor by 7 percent and increasing tax collection rates by almost 2 percent.

A budget that was once $96 million has been reduced to $83.5 million.

By maintaining the fund balance and reducing expenditures, the county was able to maintain its A+ rating when reviewed in 2004 by Standard & Poors rating service. The rating helps the county get the lowest interest rates when borrowing money, but the fund balance also has to increase to accomplish the projects facing the county.

The county meets the state requirements for the money in its general fund, but it's now at the low end of what the state recommends.

Commissioner Jack Best said he knew Smith and his staff had spent a lot of time working on the budget.

"But we're going to spend a long time on it too," he added.

The commissioners will meet on May 31, June 1, and June 7 for budget work sessions. More work sessions are expected to be scheduled before the public hearing on June 21.