‘Lowest tax rate in North Carolina’: Macon County budgets for revenue neutral tax rate
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Revenues
Ad valorem property tax collections are the primary revenue source in the general fund budget accounting for about 53% of funds. The Fiscal Year 2023-24 budget currently under consideration by county commissioners is the first budget produced following the reappraisal of real property in Macon County. The revaluation is required of the county every eight years by the state of North Carolina and this year resulted in an increase to the Macon County tax base of 51%, from approximately $8.5 billion to about $12.8 billion.
“A revaluation in any year is a heavy lift, and it is an especially heavy lift when you’re talking about a 51% increase in property values,” said Roland. “Following that, you had 2,100 appeals that have come through this tax office. Approximately $1.4 billion in value was appealed and of that appealed amount, $300 million of it was overturned through adjustments after sitting down and going through this with property owners. That’s a tremendous job by the tax office and a great job by Abby [Braswell, tax administrator] and her staff.”
In the budget cycle directly following a revaluation, North Carolina General Statute requires the budget to list the revenue neutral tax rate — the tax rate at which the county would generate the same property tax revenue as the year before, prior to the revaluation, with the new total assessed valuation — however, counties are not required to implement the revenue neutral rate. Macon County administration has proposed a 2023-24 budget that is balanced at the revenue neutral tax rate of $0.27 cents per $100 of assessed value. If the county commission approves the budget as recommended, Macon County will likely have the lowest tax rate in the state of North Carolina.
“If your property value went up around the average, you’re either going to see a tax decrease, or you might see a slight tax increase,” said Roland. “But regardless, if you stayed in that 48-51% increase range with your property, then your tax impact is going to be minimal to negligible.”
Despite the choice to recommend a revenue neutral tax rate, the county will see more than $1.5 million in additional tax revenue coming into the 2023-24 budget. Just over $100,000 of this is attributed to a 0.37% increase in the tax collection rate thanks in part to upgraded tax collection software. Another $500,000 is attributed to the revaluation growth factor of 1.62% and over $800,000 of it is attributed to the $200 million growth in the tax base during the 2022-2023 Fiscal Year.
“That natural growth would have happened regardless of the revaluation,” said Roland. “It happened between ‘22 and ‘23, that growth at $200 million was resulting in us under-projecting the tax base for ‘23. There was simply more growth that occurred than we projected and that $200 million is going to account for that $870,195 increase in this revenue category.”
Sales tax is another primary revenue source which accounts for about 22% of the overall budget, or about $14.1 million in the coming fiscal year. That’s representative of a $1.9 million increase over last year.
Expenditures
The budget accounts for two new positions in the sheriff’s office — one deputy and one narcotics investigator. This will increase patrol to six per shift and will result in full-time law enforcement coverage in Highlands and Nantahala areas.
“Demand in the sheriff’s department remains steady, averaging approximately 13,500 calls annually and demand continues to increase,” said Roland.
Both positions are funded by reductions to operating expenses in the sheriff’s budget, primarily a reduction in budgeting for overtime.
For the first time in four years the recommended budget proposes increasing the county’s allotment for public education. The education expenditure will increase by just under $1 million for a total of $10.1 million. Most of the additional funds, $880,638, will go to the Macon County School system and the remaining $72,482 of additional funds will go to Southwestern Community College to cover cost increases associated with general supplies, maintenance and utilities. The increase in funding to MCS falls short of the school system’s funding request.
“While that falls short of the school system’s $1.5 million requested increase in operational funding, it will be vital to the school system in the coming fiscal year,” said Roland. “It’s going to allow them to address inflation in the cost of goods, personnel and services.”
During the 2023-24 Fiscal Year, average daily membership of Macon County Schools is expected to increase to 4,433 students. According to data available from the Department of Public Instruction, Macon County ranked 51st out of 116 school districts in per pupil appropriation for current expenses in Fiscal Year 2022-23 at $2,031 per pupil. That amount will increase to $2,187 per pupil if the recommended 2023-24 budget is adopted.
The school system currently has a long list of pressing capital needs, including the possibility of a new Franklin High School. Earlier this year, the county commission asked the school board to prioritize the list of capital needs and committed to funding the top five priorities. This left a project that would renovate Highlands School off the list. Since the decision was made, Highlands residents have been imploring the county commission to fund the project.
The recommended budget includes an increase of $177,375 for education capital outlay for a total of $2.1 million. This includes the annual Macon County Schools capital outlay amount of $1.15 million, plus $873,658 for the replacement of the Highlands soccer field and $115,000 for improvements at SCC.
Growth
According to the county manager, between 2021 and 2022, Macon County saw a 1.3% increase in population, exceeding the regional growth for the same period which is estimated at 0.2%.
“This population growth, which began during the pandemic, has been accompanied by economic growth. Particularly in the real estate industry, construction industry and in the travel and tourism industry,” said Roland.
In 2021, during the height of the COVID-19 Pandemic, visitor spending in the county totaled $390 million for the year. In 2018, visitor spending totaled $178 million. That represents an 82% increase in visitor spending from 2018 through 2021.
“Undoubtedly, this has been a primary contributor and still is contributing to increased sales tax growth in Macon County,” said Roland. “From 2021 to 2023 the average actual sales tax revenue that we have received has been 15.3% above prior year actuals. For the years 2015 through 2020, just to give you some idea, the average actual sales tax growth for those five years was 5%. So you’re looking at tremendous growth in sales tax revenue there, driven by that travel and tourism industry.”
While real estate sales in Macon County have declined by about 30% through 2023 to date, average sale prices in the Franklin area have remained largely unchanged at around $290,000. In Highlands, real estate prices year to date through May have exceeded last year’s by over 30% with an average sales price of over $1 million.
Construction and development have continued to increase into 2023. During 2022 the county issued 720 building permits that had a total estimated value of 200 million and added 235 buildings onto the tax rolls. In 2018 the county issued 430 building permits with a total estimated value of $70 million.
“This economic growth we’re experiencing here locally is directly reflected in increases to our primary revenue sources in this budget. This growth, while it has created economic development, has also presented challenges. Inflation, although it’s down, is up 5% through March of this year, which is down from 8.5% through March of the prior year,” said Roland. “It simply costs more to do business because of that and while it is reduced, it still persists.”
Next steps
After the county manager presented the proposed budget to commissioners at their May 23 meeting, commissioners agreed to take time to digest the information before coming back for a work session to discuss the budget.
Commissioner John Shearl said he would like to see a list of all the needed repairs to all county buildings and properties during the next meeting.
“We need to, in my opinion, get a list of these things and start taking care of these buildings and properties that the taxpayers of this county have built and paid for. They are in desperate need of maintenance,” said Shearl. “That’s where our taxpayers' money will be best spent is taking care of this stuff that they’ve bought, built and paid for and not ignore this stuff.”
Shearl said that while the budget was proposed with a low tax rate, some Macon County buildings are “falling apart,” a statement that the county manager said was “not true.”
Commissioners were set to hold their first budget work session at 12 p.m. Tuesday, May 30, and hear from school administration, the Sheriff’s Department and Macon County Emergency Management.
