01/28/07 — Consultant tells commissioners tax hike a must

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Consultant tells commissioners tax hike a must

By Andrew Bell
Published in News on January 28, 2007 2:02 AM

A property tax rate increase of at least 5.5 cents would be needed over the next two years to pay for the capital improvement projects facing Wayne County, a consultant told the county commissioners Friday during a day-long annual planning retreat.

Commissioners met at the Goldsboro Country Club to discuss objectives. Ted Cole of Davenport and Co., the consulting firm hired to help guide the county finances, said that despite having a large reserve account on hand, the county would need to raise taxes to pay for costs associated with schools and other projects under consideration by the commissioners, such as an animal shelter, jail expansion and health and human services department expansions.

The commissioners considered a number of funding plans for the capital projects, but each scenario led back to the same conclusion -- a property tax increase will be needed.

The current tax rate is 73.5 cents per $100 worth of property.

Under one proposal, the county would not immediately increase the tax rate nor spend money from its reserves. But that would necessitate a significant increase in the following years.

Under another, the county would go ahead and spend its reserves, but the commissioners would still need to eventually raise taxes to pay off the debt incurred by the building projects, Davenport's study said.

Cole pointed out that the proposals did not take into consideration the added expense of operating the new facilities.

Commissioner Jack Best noted that potential state help, through the sale of bonds, could help the county's financial situation. Counties across North Carolina are lobbying the General Assembly for help with paying for new schools.

Wayne school officials have said the county schools need $90 million for facilities. Over the past year, the Board of Education and the commissioners have worked to develop a building and financing plan, but they have yet to reach agreement on how much money is needed, where it would be spent and where it would come from. The sale of bonds is the most likely way to raise the money, but no deal has been struck on how big a bond issue would be put to a public vote, or when.

In Davenport's preliminary plan, the county would provide $31 million in the next year for the schools' facilities needs. That money and the funds for all other capital projects would be derived from some sort of future financing, such as certificates of participation or a bond referendum, according to the plan.

The county would issue another $31 million in 2009 and again in 2011 to pay for schools' facilities plan.

According to Davenport's plan -- and the hopes of the commissioners -- the county would pay for a new, 11,500-square-foot animal shelter with cash instead of financing the project.

Now that the site plan is complete, architects are finishing the final specifications to build the shelter on county-owned land near the Goldsboro-Wayne Municipal Airport. Although the commissioners have not approved the location, County Manager Lee Smith said all of the pieces are in place when they do.

"We have a dozer ready to start work on the site in February," he said.

County officials expect the shelter to cost about $1.25 million in addition to the nearly $250,000 donated by local residents.

Since the county has three times the state-recommended amount of reserves available, Davenport advisers believe the county should pay for the shelter with cash.

Other projects that should be able to be paid for in cash next year include economic development initiatives. The county could provide economics development incentives with $1 million beginning next year and continue with that amount until at least 2012. Wayne County Development Alliance President Joanna Thompson said the money would be used for building new shell buildings to help recruit industries to the county and land acquisition in northern Wayne to help attract other industries.

Davenport's plan also calls for school and county building repairs to be addressed.

"This would be another pile of money for roofs or whatever else," Smith said. "I think we may be guilty of not providing enough to keep things updated."

In fiscal year 2007-08, the county would provide itself with $2.7 million for improvements and increase allocations each year until the county received about $3 million in 2012, according to Davenport's plan.

The schools would also see an increase in allocations. The school board would receive about $1.4 million next year with the amount increasing up to about $1.7 million in 2012.

Wayne Community College would also receive funds over the next three years to repair roofs and to pay for any other maintenance needs. Beginning this past year, the community college received $425,000. The system would receive that again next year and then get $300,000 in 2008 and 2009, according to the capital plan.

The next major capital expenses would come during the 2009-10 fiscal year. In addition to the $31 million planned for schools that year, the Davenport plan finances $48 million for a new jail and $12 million for two new library branches.

The county has already hired Brennan and Associates twice to advise on jail expansion. The first time, the consultant evaluated the feasibility of renovating the existing jail. The company is now completing its second report evaluating the construction of a new jail.

The existing jail, which has a daily population of 250 inmates, is expected to have a population of 350 in 20 years, according to Brennan and Associates' first study. Renovations are not expected to solve the problems, Smith said.

Davenport's preliminary capital plan finally calls for $20 million in 2011 to build a new facility for the Health Department and Department of Social Services. Both departments are currently housed in the Wayne County Administrative Building at 301 N. Herman.

The Health Department, which occupies the first, third and part of the second floors, sees thousands of patients a year. But the building has outlived its use, Health Director Jim Roosen said. The first floor is damp and smelly and there is not enough space for examinations or waiting rooms, Roosen said.

The Department of Social Services, which saw 27,000 people in the past six months, has the same type of overcrowding problems, Social Services director Judy Pelt said.

Cole commended the commissioners on their efforts to save money, but he said a tax increase cannot be avoided.

"You've handled your finances well. You've put away money, and your debt is manageable. Your about as well-positioned as possible for the daunting task ahead," he said.

But Davenport consultants warned that unless more money is made available, the county could still wind up with a poor rating for borrowing money.

Constultant Bob High of Davenport said that if the county allows its debt to reach too high a percentage of its budget, it could make borrowing money more expensive.

For example, if the county pays for all of the capital improvement projects on Davenport's plan without raising the tax rate by more than 5.5 cents, the county will exceed its own debt service to expenditures limit of 12 percent to almost 17 percent in 2013.

"If you have 17 percent going to debt service, you don't have leverage for anything else that may come up," High said, referring to unexpected capital or maintenance costs.

Cole and High suggested that the county refine its capital improvement plan over the next several months to consider operating costs, total cost amounts and a timeline for construction.