Large tax rate increase likely for Sylva
Sylva’s leaders have known for a year that taxes would have to go up in 2016, but it’s unlikely any of them expected to be discussing a budget featuring a 41.7 percent tax rate increase.
Though nothing is final, the draft budget is built on a property tax rate of 42.5 cents per $100 of property value — a hefty hike from the current rate of 30 cents. People aren’t going to like it, commissioners said, but most of them asserted that the hike was unavoidable and that despite its magnitude on paper, the higher rate wouldn’t bring in enough money to fund much beyond what the town currently budgets for.
“The budget expenditures are responsible and the revenues are conservative,” said Town Manager Paige Dowling, “so we’ve really tried to build a budget that accounts for the town’s needs but isn’t excessive for citizens, even though a tax rate that high seems excessive, but my hope is when all these unknowns … get resolved that there would be savings within departments.”
According to Dowling, it was a convergence of unfortunate circumstances that combined to force a tax hike. First, there was the county revaluation, with new values going into effect for the budget year starting in July. Usually revaluations cause an increase in property value, but because this was the first one following the sky-high values before the recession, it represents a countywide decrease — though Sylva’s decrease, estimated at about 6.5 percent, is substantially less than in other parts of the county.
Then there were ballooning costs for existing line items. Insurance premiums, though not yet finalized for the new budget year, are expected to rise by about 30 percent. The county must also budget for employee retirement benefits and state-mandated separation allowances for police officers — 85 percent of their salary every year between retirement and age 62. In addition, the town hasn’t had a tax rate increase in 12 years, with the board last year drawing from its saving account to meet basic budget needs.
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The hospital wildcard
In April, a huge wildcard landed in the midst of it all — how much tax revenue could be collected from Harris Regional Hospital. The hospital, which had previously operated as a nonprofit, was purchased in 2014 by the for-profit company Duke LifePoint, which paid $25 million for Harris and Swain Medical Center, also pledging $43 million in capital investment at the hospitals.
When county tax assessors this year declared Harris to be worth $42 million, the hospital appealed the decision and said the facility is worth only $13 million. At a 42.5-cent tax rate, the $13 million value would mean $127,000 less in revenue for the town compared to the $42 million value, about 6 percent of the town’s budget. It’s unlikely the question will be settled by June, when commissioners will vote on the budget, and commissioners didn’t hide their ire at the predicament.
“And they’re saying its worth $13 million?” said Commissioner Greg McPherson, after learning about the $25 million deal at a budget work session commissioners held last week. “Who are these people?”
“They’re being very poor partners in the community because somebody else has to foot that bill now,” said Commissioner David Nestler. “It’s very disappointing to me.”
Harris CEO Steve Heatherly had no comment on the situation other than to affirm the hospital’s written statement that “it is important to us that the property valuation is fair and consistent with true market value, which is why we are appealing the current property tax valuation.”
Dowling had built the budget to include a half-cent worth of revenue to fund capital projects and 2 cents to go toward projects the board envisioned to improve Sylva, such as public restrooms downtown and a skate park. After the hospital filed its appeal, that plan was history.
“The hospital appeal throws all the capital out the window,” Dowling said.
Disagreements about funding
Despite the increase in tax rate, the budget is a lean one, said Dowling, an opinion shared by much of the board.
But not by everyone.
“It don’t look like you’re going to cut anything, but I’ll just tell you what I believe, which is that we cannot raise taxes that much this year,” said Commissioner Harold Hensley.
Hensley, in his 11th year on the board, has been staunchly conservative in fiscal matters and voted, along with Commissioner Mary Gelbaugh and former Commissioner Danny Allen, against a 2-cent increase in last year’s budget talks.
Specifically, Hensley said at the work session, the board should stop paying for the public parking lot it rents downtown catty-corner from Innovation Brewing and get a better price on its lawn-mowing contract for the cemetery.
Both line items are small pieces of the $3.7 million budget. In a year, the town pays $6,000 to rent the parking lot and $10,000 for the lawn-mowing contract. But, Hensley said, “it’s the principal of it,” — small pieces add up over time.
He didn’t find too much support from the other commissioners, especially when it came to the parking lot.
“It’s going to hurt business,” Gelbaugh said of taking away the parking lot.
“It’s going to take away all of the goodwill that we fostered,” said McPherson. “Let’s approach the merchants about renting it. It’s not that much money.”
“If you wanted to make the merchants pay for that you could, but that’s another tax increase right there,” countered Nestler. “I don’t think anybody is going to like that.”
“I didn’t say make the merchants pay for it,” Hensley replied. “I said if they want to. We’re making people who never set foot downtown pay for it. Is that fair?”
Hensley found a bit more support when it came to the lawn care contract, with McPherson agreeing that $10,000 for 24 hours of labor per month, nine months of the year, sounded high. Commissioners discussed asking around to see if a better price was out there.
But even if both the parking lot and lawn care costs were completely eliminated, that would still represent less than a half-cent worth of the tax rate.
Looking for cuts
“I have a copy of the budget as does everybody else, just scouring every line just to see what we could possibly do without, and our budget is very lean,” said Mayor Lynda Sossasmon.
Nestler agreed that “there’s not a whole lot of room” to cut, but he is coming up with a list of questions to ask at the board’s next work session — 2 p.m. Thursday, May 5 — to fine-tune the new budget.
Specifically, whether the police department could be run more efficiently. The draft budget allocates the department $1.1 million out of $3.7 million. By comparison, the town is expected to collect $1.7 million in taxes at the proposed 42.5-cent rate. To Nestler, that proportion makes the police department the obvious place to look for cuts.
“There’s also the huge risks with cuts in that department,” he acknowledged. “This is public safety. It’s not something you just throw numbers at and try to cut. You have to make sure if you try to cut in that realm that you can do it safely.”
It’s safe to say that Police Chief David Woodard is not a fan of potential cuts in his department.
“You’re operating down two people right now,” Nestler said to Woodard at the work session. “How realistic is it to say one of those positions isn’t filled?”
“I don’t want to go there,” Woodard replied.
As to where the final tax rate will settle, that’s yet to be determined. It won’t likely go up from 42.5 cents, Sossamon said, and everyone would like to see it go down if cuts can be found.
“All I can say is we have two months until the budget gets approved still, and we are just going to keep looking for cuts,” Nestler said. “But long-term when you look at your budget — and I said this when I ran — cuts are not healthy for your community. You can’t in the long-term have a healthy community when you cut everything.”
Town taxes around the region
Tax rates vary around the region based on a town’s size and tax base. Currently, Sylva’s is on the low side, but this year’s proposed budget would put it neck-and-neck with Waynesville, near the top of the list.
•Canton — 0.58 cents per $100 of property value
•Waynesville — 0.4382
•Bryson City — 0.35
•Sylva — 0.30 (proposed change to 0.452)
•Franklin — 0.28
•Dillsboro — 0.21
•Highlands — 0.1640
Rates are based on 2015-16 budgets as reported at www.dor.state.nc.us.
