Tax rate to stay flat in Sylva

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Tax rate to stay flat in Sylva

Town commissioners agree that the pool is a valuable amenity to town residents, but it’s also expensive to maintain, even with Jackson County splitting the cost. Holly Kays photo

Sylva residents won’t see a tax increase this year, but despite the proposed budget’s 15 percent spending increase over 2018-2019, purse strings will remain tight.

The proposed budget would total $4.3 million in general fund expenditures, up from $3.7 million in 2017-2018. The increase is due mainly to necessary expenditures such as catching up on retirement benefit contributions — which the town skimped on during the recession — replacing equipment such as two police vehicles and a failing bucket truck, maintaining the pool and paying for sidewalks.

“One thing that I would like to point out is the target (fund balance) goal from the treasurer and the local government commission for towns our size has gone to 76.65 percent,” Town Manager Paige Dowling told board members during an April 26 work session. “Passing this budget, it would leave our fund balance at 57 percent.”

A fund balance is akin to a town’s saving account, with its size expressed in terms of the percentage of a year’s expenses it holds. Having a healthy fund balance is considered important to a town’s ability to deal with emergencies and unforeseen circumstances. Board members said they didn’t love the idea of going down to 57 percent but didn’t see another viable alternative.

“We hate to do a lot of these things, but it’s necessary,” said Commissioner Barbara Hamilton.

Of the $189,100 planned to come from fund balance, $100,000 will be set aside to fund sidewalk construction along N.C. 107. Appropriations for the sidewalks will be spread over two to three years, totaling somewhere between $200,000 and $300,000. Sylva must start planning for the expense now if it ever wants to see sidewalks along that stretch of road. The N.C. Department of Transportation is planning a road project along N.C. 107, and it will fund 80 percent of the cost of sidewalks if Sylva puts in the remaining 20 percent, providing for as good a deal as Sylva will likely ever get.

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“We would hope that $200,000 would be enough, but we’re going to have more concrete numbers when we get to that point,” said Dowling.

“No pun intended,” laughed Commissioner Greg McPherson.

Other increases to the budget stem from higher sales and property tax collections, improved interest rates on investments, grants, and other smaller items.

In 2016, Sylva raised its taxes from 30 cents per $100 of property value to 42.5 cents per $100. The tax hike aimed to get the budget solvent and prevent the town from continually drawing out of fund balance to maintain its daily operations.

While the proposed budget will take nearly $200,000 from fund balance, Dowling said this is a different scenario than fund balance appropriations before the tax increase, with the town in much better shape than it was two years ago.

“Five years ago we were taking $200,000 out (of fund balance) for operating expenses,” she said. “This isn’t what’s happening with this budget.”

Proposed fund balance appropriations are for one-time expenses that must be funded now and can’t be funded through other revenues, she said, and the town is more caught up on capital expenses than it’s been in the past.

“I think the large capital outlays would come from my department for equipment. I’m probably done for 12 to 15 years,” said Public Works Director Dan Shaeffer, who will retire next year. “You guys have been really good to us, and I think they’re in good shape for about that long.”

Maintenance at the pool is the only recurring expense that’s planned to come from fund balance. That’s not an expense that was included when the 2016 tax increase was enacted, Dowling said. Commissioners spent a few minutes mulling that quandary, trying to brainstorm ways the pool could bring in more income or be managed differently so as to be less of a burden on the town’s budget.

“The pool is not ever going to make money, unfortunately,” said Dowling. “Pools don’t make money.”

“How much of an unforeseen expense would it take to put us in a dangerous spot with our fund balance?” asked Commissioner David Nestler.

Dowling replied that the town is in much better shape with capital expenses than it’s been in the past and that the fund balance level could actually improve over the number forecast in the proposed budget. Every $100,000 expenditure drops the fund balance about 3 percent, she said.

“I do feel like we’re going to put some back in this year,” said Lynn Bryant, finance director for the town, said of the fund balance. “All the departments are coming in under their budget, so we’re going to have revenue from that if they continue for the next two months to put that in. And our sales tax has come in above what was anticipated. My hope is it’s going to be in the low 60 percent and not in the 50s.”

While sales tax revenues have come in strong this year, the town could see a reduction in tax revenue in 2020, when the N.C. 107 road project begins. The town’s tax base will take a hit as right-of-way is acquired, and sales tax revenue will be negatively impacted as construction impedes access to commercial businesses along the project corridor during the two-year project, Dowling wrote in her budget message.

Dowling will formally submit the proposed budget to the board at its 5:30 p.m. Thursday, May 10 meeting. A public hearing will be held 5:30 p.m. Thursday, May 31, with the budget adopted thereafter.

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