Canton budget hole, thanks to Pactiv, approaches $1 million

Board members (left to right) Tim Shepard, Ralph Hamlett, Zeb Smathers, Gail Mull and Kristina Proctor attend a budget workshop on April 8. Cory Vaillancourt photo Board members (left to right) Tim Shepard, Ralph Hamlett, Zeb Smathers, Gail Mull and Kristina Proctor attend a budget workshop on April 8. Cory Vaillancourt photo

Ever since Pactiv Evergreen announced back on March 6, 2023, that it would shutter its paper mill in Canton, town officials have been bracing for the budgetary impact that the closure would cause.

The announcement came during last year’s budgeting process, prompting some small cuts at that time, but this fiscal year, the effects of the closure are finally in full view and they’re even worse than imagined. 

“This is probably the toughest year that we will face, based on revenue,” said Natalie Walker, Canton’s CFO.

Although Canton has projected some small revenue increases for the coming year, they don’t nearly compensate for what’s to come.  

“I am going to tell you that 2024-25 tax year is going to be very, very difficult,” said Wanda Lurvey, Canton’s tax collector known for her historically high collection rates. “You’re going to have to make tough decisions because right now with preliminary figures, I’m showing we’re going to have a reduction in tax revenue of approximately $1 million.”

Canton’s current general fund budget is on the order of $8 million.

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Lurvey went on to plead with the board to continue its budget planning without considering what revenue it might receive from Pactiv, because as the company’s business personal property is assessed, Lurvey expects Pactiv to dispute whatever total the county’s assessor provides.

There is plenty of precedent for Lurvey’s suspicion; in 2023, shortly after the mill’s closing was announced, Pactiv fought the $19.8 million property tax valuation of its 185-acre mill parcel. Company attorneys said the property was only worth $5.8 million.

The Haywood Board of Equalization and Review torpedoed that request in short order, but Pactiv has filed an appeal with the North Carolina Property Tax Commission and has also filed a retroactive appeal on business personal property taxes it paid that year, which if successful would necessitate both Canton and the county refunding more than 90% of the $1.3 million that Pactiv did pay.

For the coming tax year, Lurvey is concerned that Pactiv will receive their tax bill, sit on it until filing an appeal, leaving the bill — due by Jan. 1 — unpaid until a resolution occurs.

Municipal budgets must, by law, be adopted no later than June 30 of each year. The uncertainty surrounding Pactiv’s payments makes budgeting a near impossibility.

There are also ancillary revenue losses anticipated due to downturns associated with companies that used to do business with the mill, but it’s not yet clear what impact those losses will have on the budget.

Then, there are the usual cost increases all municipalities face, year after year, that Canton will have to figure out how to ameliorate.

WastePro will increase its rates 5.2% based on the Consumer Price Index from the Bureau of Labor Statistics, which comes out to nearly $13,000 per year and brings the total contract cost to $262,205.

Health insurance premiums will see a 6% increase, or about $64,000, on the $1.1 million annual policy. In addition to a likely 2% cost of living adjustment for employees and the $1,000 yearly Christmas bonus for full-time employees, Canton’s 100% health care coverage is an important tool for employee retention efforts.

Contributions to the state retirement fund, both for general employees and for law enforcement officers, will both go up by around a point, to 13.65% and 15.04% respectively.

Also on the table is a proposed vehicle registration tax that failed in 2018 and was briefly brought up again in 2022. Last year, the town expended $151,000 in Powell Bill funds for street improvements, but due to the exorbitant cost of such repairs, that amount of money got the town exactly 0.66 miles of new pavement.

If enacted, the town would raise $18,220 for every $5 charged for a registration tax, up to a $109,320 for the maximum-allowable $30 fee. Mayor Zeb Smathers said he’d like to be able to present detailed paving plans to the public if such a tax was implemented, but that may not be possible due to the need for unexpected repairs.

Water and sewer rates will also rise slightly, both for customers inside and outside town limits, but that’s one pain point not directly attributable to the mill; Canton’s aging water infrastructure has suffered a number of setbacks of late, and the pre-planned increases will help with maintenance and upgrades.

Despite the uncertainty surrounding this year’s budget, the town does have a cushion upon which to fall back — a $4 million unrestricted direct allocation from the General Assembly made last year and meant exactly for this purpose.

It’s likely that the town would dip into this reserve to fund continuing operations, but without additional economic development over the next few years, once it’s gone, it’s gone.

Canton is expected to hold a public hearing for the budget on Thursday, May 23, however, that could change at any time.

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