Raleigh ponders alternatives to tax boost

Taxpayers already upset about plans to raise Raleigh's property tax rate by 15 percent next year should brace themselves for more bad news.

To pay for projects costing more than half a billion dollars, City Manager Russell Allen is also proposing tax increases in 2011 and 2014.

"If we want to build these projects, we have to be able to pay for them," Allen said.

Those projects are coming under increased scrutiny by the City Council, which is not eager to pass Raleigh's largest property-tax increase in more than a decade during an economic downturn. Among the projects getting a closer look are a $226 million public safety center and a network of remote operations facilities costing $223 million.

"Russell Allen is doing his job, but that doesn't mean we have to listen to everything he's saying," Councilman Rodger Koopman said.

Allen's 5-cent tax increase per $100 of assessed value would boost the bill for a $250,000 house by $125 annually, not including the sizable increase some homeowners will face as a result of a revaluation last year in Wake County. The revaluation, the first in eight years, raised the tax value on residential properties in Raleigh an average of 41 percent.

Allen would raise the Raleigh property tax rate 2 cents in 2011 and 2014. First, he has to win over the council.

"The bottom line is I will not vote for a 5-cent increase," Koopman said. "I would like to see us get much closer to half that."

If the council adopts a smaller tax-rate increase than Allen wants, it will likely need to scale back or significantly delay projects that most members agree are long overdue.

In 2002 the council voted to build a new headquarters for the police and fire department downtown, although its cost and scope were not determined then. Earlier this year the city unveiled plans for a 17-story building on the site of the current police headquarters at Hargett and McDowell Streets.

Councilman Philip Isley said his only concern with the public safety project is that the $226 million price hasn't been scrutinized more. "There's not been a lot of discussion on other options," he said.

The city has purchased the land for the remote operations facilities, which will enable various city departments to be closer to the areas they serve. For example, trash trucks that serve North Raleigh communities will be permanently located near those routes instead of downtown.

Allen notes that while delaying these projects may provide some immediate relief, Raleigh taxpayers could end up paying more if construction costs continue to rise and the city has to borrow the money later at higher interest rates.

Bad timing

Few residents took such a long-term view Tuesday when Allen's budget proposal was discussed. Several speakers were cheered after telling the City Council that they couldn't have picked a worse time to consider raising property taxes.

"I'm asking you to be careful and responsible with my family's money," pleaded Victor Marks, 33, a father of two.

"The people who really can't afford it are going to be hit the hardest," said Paul Terrell III, a Republican running for a state house seat in Raleigh.

Allen maintains that, even with his proposed 5-cent property-tax increase and 15 percent increase in the water and sewer rate, Raleigh remains less expensive than other large cities in North Carolina.

But the city is proposing to raise taxes at a time when household budgets are being squeezed from all sides. Besides the tax boost homeowners may already face because of revaluation, they are also dealing with rising food and fuel prices.

Longtime Raleigh residents are accustomed to stable property-tax rates. The city went 13 straight years without a property-tax increase before the 1-cent increase in 2004. Two years later the council approved a 4-cent increase.

City officials could hold the line on rate increases because rising property values and growth brought in more revenue from homes and businesses. But Raleigh is now facing rising costs, declining sales tax and inspection fee revenue and looming debt payments.

Half of Allen's proposed 5-cent rate increase would pay off debt on capital projects and parks bonds; the other 2.5 cents would go to deliver city services.

Councilwoman Mary-Ann Baldwin said she'd like to increase property taxes by no more than 3.5 cents.

"We're trying to be sensitive to the public in terms of the increase," she said. "I don't think we can get it much lower than that."

Baldwin said Raleigh is now paying for its failure to invest enough in infrastructure. "All these investments should have been made 10 years ago," Baldwin said. "Now we have to bite the bullet and do it."