Chapel Hill News

May 27, 2014

Manager: Orange County spending ‘not sustainable’

A tax increase is in the county’s future at current spending and revenue rates, interim County Manager Michael Talbert told the Orange County Board of Commissioners.

Orange County is headed to a future tax increase at current spending and revenue rates, interim County Manager Michael Talbert says.

Talbert presented next year’s proposed $195.6 million county operating budget last week. It pulls $8.5 million from saving to cover a shortfall and is a $7.9 million increase over this year’s $187.7 million budget.

“This trend is not sustainable, obviously,” Talbert said. “There will be tax increases in the future.”

While this is the sixth year without a property tax increase, the county has used more of its savings to cover shortfalls in last five years.

The county’s savings, or fund balance, is down to $36.7 million, or roughly 20 percent of the annual operating budget, increasingly close to the minimum 17 percent the county likes to have to cover unexpected expenses.

If the county hadn’t used its savings in recent years, the tax rate during that time would have grown by 10.8 cents per $100 of assessed property value to cover an extra $18 million in expenses, Talbert said.

A penny on the county’s 85.8-cent property tax rate generates roughly $1.6 million.

How much depends in part on a planned revaluation – the first one since 2009 – that takes effect Jan. 1, 2017. A state analysis shows the county’s assessed property values are 5.5 percent higher than the market value of those properties, he said.

A revaluation at current values would force the commissioners to raise property taxes by 4.42 cents per $100 valuation to meet existing expenses, he said.

Fewer dollars also could affect a $100 million bond the commissioners could put on the 2016 ballot, he said. The county has more than $300 million in city and county schools’ renovation, repair and building projects, plus needs ranging from a new jail to solid waste, water and sewer projects.

The debt on a $100 million bond would add 3.78 cents to the property tax rate, he said. With revaluation, it could grow to seven or eight cents, he said.

An eight-cent increase would make the tax rate 93.8 cents for every $100 in assessed property value. The annual property tax bill for a house valued at $300,000 would be $2,814, or an extra $240.

AAA bond rating

Despite its potentially tough choices, Clarence Grier, the county’s chief financial officer, said the county is in “real good financial shape.”

The county recently achieved a AAA bond rating – the highest possible – which is the first step toward being on solid financial footing, he said. A higher bond rating allows governments to borrow money at lower rates.

County staff members also are taking steps to close the gap between the use of its annual revenues and savings, Grier said, and to cut costs where possible. Bond projects also could be managed to limit the amount of debt the county might repay each year, he said.

Related content



Editor's Choice Videos