10/09/13 — County plan for facilities requires tax hike

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County plan for facilities requires tax hike

By Steve Herring
Published in News on October 9, 2013 1:46 PM

A 17-cent increase in the Wayne County property tax rate would be needed should county commissioners decide to pursue all of the projects in their proposed 10-year capital improvement plan.

Ted Cole and Bob High of Davenport & Co., the county's financial consultants, reviewed the $223,957,663 plan during Tuesday's joint meeting between commissioners and the Wayne County Board of Education.

They also discussed possible financing and funding options, including a bond issue and a quarter-cent increase in the sales tax.

But even if the public were to approve a sales tax hike, the total increase in the projected property tax rate would only be lowered by about three cents, from 17.33 cents to 14.14 cents.

Without a sales tax hike, the first property tax increase of 3.80 cents would come in 2018. Another 2.07 cents would be added in 2020 and 4.39 cents in 2021. Those increases would be used to help pay for the capital projects only and not any increases in operating costs associated with the new facilities.

Another 7.07 cents would be added in mostly smaller increments between 2015 and 2041 that would be applied to increases in operational costs created by the schools and other projects. The largest increase would be 2.65 cents in 2016.

Combined, the total increase would be 17.33 cents per $100 worth of property.

With the additional sales tax revenues, the increases would be 3.8 cents in 2018, .83 cents in 2022 and 2.45 in 2023 for a total of 7.08 cents for the capital projects. Combined with the increases for the operational costs, the total would be 14.44 cents.

Commissioner Joe Daughtery questioned why the tax rate for the capital projects continued throughout the entire life of the 20-year payback period even though the figures indicated that the additional taxes would not be needed after a certain time.

Over time, commissioners would be able to reduce the tax rate as projects are paid off, County Manager Lee Smith said. However, the additional taxes needed for the operational costs would remain because those costs would be ongoing, he said.

Also, the operational costs in the plan are associated with just the capital plan and do not include any existing facilities, Cole said.

Smith also said that commissioners might leave some of the tax increase in place to begin rebuilding funds that could be used to help pay for the next round of school and capital projects. He compared it to paying off a car loan, but continuing to set aside the payment to pay for the next vehicle.

Cole added that the total projects' costs are based on certain assumptions about interest rates, growth in county revenues and other factors that are subject to change.

One such assumption is that the county would use the school system's entire $20.3 million reserve. However, school board member Arnold Flowers and school Superintendent Dr. Steve Taylor reminded commissioners that the school board has adopted a policy calling for it to maintain a $4 million reserve in its half-cent sales tax fund.

Removing that $4 million from consideration could add another 5 cents to the tax rate increase that would be needed to help pay for the projects.

Currently, no funds are committed to the plan other than $3.5 million for the new Steele Memorial Library in Mount Olive this year and $2 million toward a proposed $12.2 million regional agricultural center in 2016-17.

The plan presented Tuesday is different from the $257.6 million version commissioners adopted in June.

Perhaps the most obvious change concerns new schools in the Grantham and Spring Creek communities.

The June plan included a $30 million K-8 Grantham School as championed by five commissioners even though the school board supports a separate middle school.

That school is missing in the revised plan, which had not been discussed in public prior to Tuesday.

Instead, it contains $35,279,680 for middle schools on new sites at Grantham and Spring Creek in fiscal year 2014-15. In the June plan, a $17.6 million Spring Creek Middle School was slated for 2017-18.

Also, a sewer line to Grantham School, projected at $3 million in the June plan, has been revised to $3.9 million. The line would run from Mount Olive to Grantham and could serve both schools.

Other school projects unchanged from the June plan include: central attendance area schools, $1,870,463; Spring Creek Elementary, $3.85 million; and Charles B. Aycock High School, $6.6 million. Those projects are for the current fiscal year.

The cost of new elementary and middle schools in northern Wayne County is estimated at $29,618,740 for 2019-20.

Cole told the boards that as proposed, the county would borrow $75,398,420 for school projects, with a total payback of $114,817,591. Another $69,276,516 would be borrowed for the county projects and have payback of $105,646,687.

There are several financing options, including general obligation bonds that would have to be approved by a public vote and would be secured by the county's taxing power.

Tuesday's meeting was a follow-up to the two boards' joint session on July 30 and had been suggested by Commissioner John Bell.

No action was taken during the July gathering and Bell suggested at the time that none be taken until a clearer financial picture emerges. He recommended that Smith, the county Finance Department staff and their counterparts in the school system meet with Davenport & Associates.

However, no action was taken Tuesday either.