No tax increase proposed in Haywood budget

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No tax increase proposed in Haywood budget

Haywood County Manager Bryant Morehead presents his proposed budget to Haywood County Commissioners. Haywood County photo

With jail expansion debt payments coming on the books and lingering questions about one of the county’s biggest taxpayers, Haywood County Manager Bryant Morehead presented commissioners with a conservative budget that funds some critical needs, but not much else.

“I will say, the budget doesn’t have what people say would be fluff,” Morehead said during a May 6 meeting of the Haywood Board of County Commissioners. “I really call it flexibility. We’ve taken a lot of the flexibility out because we are just funding employee pay and insurance, and debt. This budget meets our needs but it really is a status quo budget.”

As proposed, Morehead’s budget calls for no increase in the county’s property tax rate of 55 cents per $100 in assessed value. Applied to the $10.3 billion of taxable property in the county at a 98.3% collection rate, the current tax rate will generate revenue of $56.5 million, up about 2.6% from $55.1 million last year.

Using those metrics, a one-cent increase or decrease in the property tax rate would equal just over $1 million. The county’s ongoing revaluation process, mandated by state law, won’t affect the proposed budget, so the natural revenue growth will push the general fund from $101 million in the current year to $106 million for next year.

Sales tax collections, which soared during the Coronavirus Pandemic, appear to be settling back down to earth. Morehead projects only a 3% increase next year.

“We’ve had some really significant growth since fiscal year ‘20. For the upcoming year FY 25, and this is not just unique to Haywood County, but statewide collections are coming in at much more modest growth — growth that you would expect before COVID.”

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Perhaps the best revenue news this year comes from a substantial 173% increase in investment earnings, from $1 million last year to $2.76 million next year. Without the increase, next year’s proposed budget would have a 1.76-cent hole.

“Inflation I guess in this case is a two-edged sword,” said Commissioner Tommy Long. “It benefitted us greatly by the revenue from our investment returns.”

Morehead explained that in spring 2022, the county’s account with the North Carolina Capital Trust was only earning half a percent in interest. In April 2023, the rate grew to 4.8%. As of April 30, it stood at 5.25%.

“Interest rates, when you’re borrowing money, the high interest rates are really tough to handle,” Morehead said. “But when you have idle cash, and we’re investing it, it’s benefitting us greatly.”

Other fees were projected to be flat, with the exception of sales and services. Due to an increase in staffing for convalescent transport, a $546,000 increase is projected in EMS revenue, roughly 10%.

On the expenditures side, there aren’t many major changes from the current year budget as the county continues to focus on employees, facilities and capital improvements.

The $6.8 million revenue increase will largely be offset by $1.5 million in public safety spending, $1.2 million in central services mainly for information technology needs and $1.1 million in interest-only payments on the $28 million jail expansion financing. Looking at the spending in another way, approximately $3.79 million of the revenue increase will be spent solely on employee salaries and benefits.

Haywood County — along with other municipal governments in the county — has spent no small amount of time and money over the last few years bringing employee compensation back to market rates in order to quell the costly turnover that can result in some employees leaving for higher-paying jobs elsewhere as soon as they’re trained.

The proposed budget again offers a Christmas bonus, 2% merit increase and 3% cost of living adjustment. Morehead said that the current budget contains a 4% COLA, but that the consumer price index is down slightly from this time last year, so the proposed 3% COLA will still maintain the market competitiveness the county has worked hard to create.

After years of stunning rate increases, employee health care coverage costs are projected to increase only slightly next year, from $19,500 to $20,000 each, resulting in a $587,000 increase to $14.1 million. In 2015, the county’s health care coverage bill was just under $6 million.

Morehead cited the county’s various employee wellness programs as a major factor in keeping health care coverages costs in check.

In line with Morehead’s “status quo” budget, there will be no new positions created in the county’s various departments this year. In total, 18 new positions were requested — six from the sheriff’s office, four from EMS, three from the tax assessor, two from HHS and one each from information technology, the library and in economic development. The total cost of the positions, if all were approved, would have been $1.74 million.

New vehicles, however, will be funded, and as with employee salaries, represent progress in staying ahead of the curve with replacements so the county doesn’t fall behind and have to purchase large numbers of new vehicles all at once to catch up with needs. In the current budget year, the county replaced 28 vehicles at a total cost of $1.8 million. Going forward, the county will spend $1.1 million to replace 16 more next year, representing a decrease of $659,000 compared to the current year appropriation. Morehead said he thinks the number of proposed replacements is more in line with what he expects to see each year.

“We spent the last few years realty getting caught up on vehicles. Now we’re in a much better place,” he said.

Vehicles aside, there aren’t many more capital projects slated for next year. The current budget has funded capital projects at the armory, the Russ Avenue EMS base and a new library roof, among other things, but the proposed budget is focused mostly on the jail expansion payments. The expansion is expected to take 24 months to complete, but principal and interest payments will begin after the commissioners will pass a budget in May or June of 2026.

Despite the jail expansion, the county’s non-education debt profile continues to be manageable. In the proposed budget, debt service stands at $2.8 million per year. Next year, those payments will temporarily spike to $3.4 million, slowly dwindling to $2 million over the course of the next two decades.

At the end of Morehead’s presentation, Chairman Kevin Ensley finally addressed the elephant in the room.

“So the Pactiv Evergreen closing, how did that impact our budget?” Ensley asked.

After 115 years of operation, Pactiv Evergreen’s paper mill in Canton was shut down by owners last June, making this year the first full budget year during which the impact of the closure would be reflected. At issue is Pactiv’s contention that its 185-acre parcel, and the business personal property on it, isn’t worth the assessed value assigned by the county as of Jan. 1, 2023. Last May, Pactiv asked for a substantial tax break on the parcel. That request was rejected by the Haywood County Board of Equalization and Review last June, but Pactiv has appealed. If the appeal is successful, both the Town of Canton and Haywood County will not only have to refund more than a million dollars each in taxes Pactiv already paid, but also accept the lower valuation moving forward.

To answer Ensley’s question, Morehead simply said the county was budgeting for the full assessed value of the parcel.

Commissioners thanked Morehead and staff for the presentation, with several of them noting that all in all, the county remains on sound financial footing despite the challenges presented.

“We are really in good shape in Haywood County, and that is because of good leadership and paying attention to the future and watching the dollar and being, I don’t want to say tight with the budget, but definitely paying attention to expenditures,” said Commissioner Jennifer Best. “So I appreciate that. It could be way worse.”

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