Proposed Chapel Hill budget would increase property tax rate, restore town services
Chapel Hill residents could face a 3-cent property tax rate increase if the proposed budget is approved as the town seeks to restore funding to many services that were cut last year when the COVID-19 pandemic hit.
Town Manager Maurice Jones proposed a $116.7 million 2021-22 town budget Wednesday — a 5% increase over last year’s roughly $111 million budget.
Roughly $71.5 million would cover the town’s day-to-day operations, with another $26.2 million budgeted for transit and $3 million for stormwater management.
Jones said sales taxes came in much higher than expected this year, despite an anticipated hit from the COVID-19 shutdown. The town’s tax revenues instead increased more than 10% last year to $13.3 million, in large part due to online sales, he said.
Revenues from sales taxes could grow by as much as 24% next year as the economy recovers, he added.
Last year also was a test for the community and the town, which focused on providing core services like public safety, transit and affordable housing — and staying flexible, Jones said. Next year’s recovery won’t be quick, but there is reason for optimism, he said.
“We believe this budget will also help lay the framework for the town’s five-year budget strategy. We’re developing a budget plan for investing in key town initiatives,” Jones said. “Our vision was to ensure we remain leaders in those areas and make future financial commitments to help us accomplish our goals.”
The town could fill some budget shortfalls with $5 million from an expected influx of roughly $10 million in one-time federal American Rescue Plan Act money. The town would get the rest of the money in 2022-23.
That money can be used to support businesses and residents during the recovery and help bridge budget shortfalls, Jones said. He noted that hotel occupancy taxes and other taxes, licenses and fees could continue to be significantly reduced.
The council will discuss the proposed budget at a May 12 work session and hold a public hearing May 19. The 2021-22 budget could be adopted June 9 and would take effect July 1.
The budget can be found at townofchapelhill.org/budget.
Property tax rate
The town’s “revenue neutral” tax rate, following Orange County’s revaluation this year, is 49.4 cents per $100 in assessed property value. The proposed budget includes a 3-cent increase, for a town tax rate of 52.4 cents per $100 in assessed value.
The owner of a property valued at $400,000 would pay a town property tax bill of $2,096, an increase of $120.
A penny on the town tax rate is expected to generate roughly $1 million.
Orange County Manager Bonnie Hammersley also recommended a 3-cent tax rate increase in her budget presented Tuesday to the commissioners. Chapel Hill property owners pay town and county taxes, as well as a special Chapel Hill-Carrboro Schools district tax.
Residents and businesses in the downtown service district also pay a special tax. The proposed tax rate for that district would be 6.4 cents per $100 in assessed property value.
The additional tax revenues will help the town deal with deferred maintenance and infrastructure projects, such as street resurfacing, and continue to pay down its debts, Jones said.
Mayor Pam Hemminger expressed concern about a 3-cent tax rate increase, because of how it could affect residents and businesses emerging from the pandemic who already face increased taxes because of the county’s recent revaluation. She asked Jones to bring back data showing how the increase would affect the owners of a range of property types and tax values.
“If Northside and Pine Knolls …. don’t get the reduction in the valuation, this tax increase is going to kill them. That’s just not OK,” Hemminger said, naming two lower-income residential neighborhoods.
“Our business community has struggled tremendously during COVID, and we just need to see what we’re doing to them, and we need to see those in numbers.”
Police budget, fire department
Members of the public urged the council last summer to cut the Police Department’s budget and reallocate the fund to community services and a different kind of public safety response.
The Reimagining Community Safety Task Force is expected to make recommendations to the council this spring on how to do that. The budget includes $100,000 to begin implementing those potential changes, and Jones also recommended reducing the number of Police Department positions from 155 to 141.
However, he also advocated for raising the starting pay for public safety employees, which includes firefighters and police, because “the competition for talent is considerable,” he said.
Current public safety employees could see additional pay increases to bring them up to the appropriate salary level over the next two years. Jones said the town could use the savings from fewer police department positions to pay for higher salaries.
Other budget highlights
▪ Town employees: The budget includes a 3% pay increase for employees, a 5.5% increase in health insurance costs, and money to restart the town’s Class and Compensation study, which will look at how the town pays its employees compared to surrounding governments.
▪ Social equity: An extra $100,000 is budgeted for Human Services for continued food and housing assistance. There is $143,250 to hire a diversity, equity and inclusion officer focused on the town’s racial equity goals and diversity initiatives.
▪ Affordable housing: The budget includes $2.2 million for public housing, plus $688,395 for affordable housing projects. The town also could spend the remaining $5 million from a $10 million voter-approved affordable housing bond.
▪ Climate change: $500,000 to start implementing the council’s recently adopted Climate Action and Response Plan, including new personnel positions and energy upgrades for town buildings.
This story was originally published May 5, 2021 at 9:41 PM.
