06/11/11 — Mount Olive budget doesn't include explanation of 'tax increase'

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Mount Olive budget doesn't include explanation of 'tax increase'

By Steve Herring
Published in News on June 11, 2011 11:43 PM

MOUNT OLIVE -- Property owners here will pay more in town property taxes next year even though the $5.1 million budget approved Monday night by commissioners did not raise the town's current tax rate of 59 cents per $100 of property value.

The board's decision not to lower the tax rate in light of new and mostly higher property values following the county-wide property revaluation is the same as a tax increase -- an increase that could be as much as eight cents.

However, most residents probably wouldn't realize that based on the lack of discussion on the tax rate. Also missing from the paperwork released by the town board are a budget message and revenue-neutral tax rate for comparison as prescribed by state law.

"I think everybody has put together a good budget that is very lean... it does not call for any tax increase," Town Manager Charles Brown said during the Monday meeting.

Brown said Friday what he meant was that the tax rate of 59 cents per $100 of value did not change.

Town officials say they did inform the community about the budget details.

"We thought it was pretty clear," Brown said Friday afternoon. "We put the budget amount and the new tax revenue in the budget, which has been out for public inspection. We had the public hearing on it. I don't know what else (the commissioners) could have done to be perfectly honest with you to make that more clear."

A possible tax increase had been broached by commissioners in earlier meetings, but no mention of the tax rate was made during Monday's budget pubic hearing or that leaving rate unchanged would result in higher taxes. Nor was it mentioned in the motion to adopt the budget.

It was not a backdoor attempt to slip a tax increase past the public, Brown said.

"We had looked at the possibility, and I think most of our board members were committed that if we had to have a tax increase to cover the budget shortfalls we have experienced in the last few years, they were willing to do that.

"It just so happened with the tax revaluation that by holding the line on our taxes it didn't make it necessary for us to do that. It would have been nice to have the additional revenue, but we just felt the fair thing to do was to stick with the revaluation and hold our tax rate where it was."

It is a moot point since state law does not allow any amendment to increase or reduce a property tax levy once a budget ordinance has been adopted. The only exceptions are if the board is ordered to do so by the court or by a state agency with the power to compel the levy of taxes by the board.

"We will get a little bit of extra revenue, I am thinking maybe $160,000 in additional revenue from the revaluation, but we have not increased our tax rate," Brown said.

Brown said that Local Government Commission officials had told the town that its finances "had gone in the ditch" eight years ago when it rolled back the tax rate following revaluation.

"I think from that point (the commissioners) were all committed to, at the very least, maintaining our tax rate where it was if not actually having to increase our rate some," Brown said.

The question is whether the budget message should have accompanied the town's budget -- and explained the tacit tax increase.

"The law is silent as to whether the message has to be written or not, but to me that (written) is the professional standard," said William Rivenbark of the School of Government at the University of North Carolina at Chapel Hill. "I think it needs to be written. It can be oral, but that is not a professional standard."

A board is not required to adopt a revenue-neutral rate, Rivenbark said. Rather, the idea is to provide "transparency" for the public.

"We have had jurisdictions to do that and since the budget ordinance is already passed they cannot go back and change it," he said. "What we advise them to do is go back and calculate a revenue-neutral rate and present it after the fact."

That still offers citizens the transparency and the board accepts it just as information only.

Brown said the town had not done a budget message or revenue-neutral tax rate.

"There was some contingency language in that approval and once we approve it without the contingency, we will have to send (the Local Government Commission) basically a letter saying what it would have been had we stayed revenue neutral and this is what it is going with the revaluation," Brown said.

During Monday's meeting, Mayor Ray McDonald Sr. said the board could amend the budget later.

That is correct.

However, Rivenbark said he did not understand the use of the word contingent in the motion since the board already has the power to amend the budget to account for either additional or reduced revenues and/or expenditures, he said.

"I don't think it violates anything," he said.

Brown said attorneys with the North Carolina League of Municipalities have suggested the board readopt the budget, changing the wording of the motion to omit the word contingent.

"I think it is an issue, but just because nobody knows what it means I think we would probably be wise to go ahead and readopt," Brown said.