Even though property values have increased, Pinehurst residents would not see a corresponding break-even reduction in the tax rate next year under a proposed budget.
Village Manager Jeff Sanborn gave the council a preview of the fiscal year 2020 budget Tuesday. He used the opportunity to make the case for asking most property owners to pay a little more in property taxes over the next five years because of “increasing pressures” on the budget and inflation.
Typically after a property revaluation, most local governments adopt what is called a “revenue-neutral tax rate.” That’s a rate that would generate the same amount of revenue as before taking into account normal growth — estimated at 1.51 percent — that would have occurred had there not been a revaluation.
In that scenario, the village’s tax rate would drop this year from the current 29.5 cents per $100 valuation to 28 cents.
“It would put us in a tailspin,” Sanborn said of the 28-cent rate and that it would force the village to dip further into its reserves to cover projected annual operating losses.
Instead, Sanborn is proposing what is termed an “inflation-adjusted revenue neutral” tax rate “because everything we do costs more due to annual inflation.”
That would put the rate at 30 cents.
“This is very different for us,” Sanborn said of an inflation-adjusted rate. “We’ve not had this type of budget environment certainly for a long time, may be not since the last recession period when we were doing all kinds of cost-containment strategies to deal with things.”
Sanborn said he realizes that Pinehurst residents will be hit with a 1.7 percent increase in the village tax rate coming on top of higher property values, and the likelihood of a tax increase from the county as a result of the passage of a $123 million education bond issue, “which could be dramatic.”
County officials have previously said a 5- to 7-cent increase could be needed next year as the county begins repaying debt on voter-approved bonds and bank loans for school construction.
Beyond the coming fiscal year, Sanborn is proposing in the village’s five-year financial plan that the rate be increased by a half cent annually, capping out at 32 cents in fiscal year 2024.
Sanborn explained that there are “three big drivers” for the need to increase property taxes. The biggest two are state-mandated retirement contribution rate increases and county mandated recycling and landfill tipping fee increases.
“If we didn’t have to contend with those two challenges, we’d be a lot closer to being able to make all the numbers work and balance this year and in the out-years with a flat tax rate than we are,” he said.
The third driver is the annual inflation rate for operating expenses, estimated at 2.5 percent annually.
“There are additional pressures being put on our budget and they are significant,” he said.
According to Sanborn’s presentation, the financial impact to the village for mandated employer pension rate increases will be $75,590 next year and would swell to a $392,557 increase in 2024 — more than $1.27 million over the five year period. Pensions for village employees are through Local Government Employees’ Retirement System.
Increases in recycling and landfill fees will require an additional $149,000 in the next budget year. The increase is expected to top $159,000 by 2024 — which amounts to an additional $771,903 the five year period. He said the fees for recycling have increased from $25 a ton to $115 a ton.
“None of us saw this coming this time last year,” he told the council.
As the village continues to grow, it will also need to add staff over the next five years — projected at 4.3 positions — in such areas as planning and inspections, streets and grounds, parks and recreation, fire department, information technology.
“There are pressures all across our staff,” Sanborn said. “We narrowed it down to the most significant ones.”
Among some of the other bigger proposed outlays in the coming five years include $200,000 to secure land for a third fire station and $200,000 for acquiring land for a parking lot or structure in the village center. Plans for a parking deck between the Holly Inn and The Pine Crest Inn were abandoned several years ago and shelved until such time it was needed.
The five-year plan also calls for spending an additional $106,000 — a 48 percent increase — on stormwater management projects next year.
“We’ve been listening to the public and they’ve been telling us stormwater, stormwater, stormwater,” Sanborn said. “We continue to deal with those challenges.”
Investing in pedestrian facilities such as sidewalks, developing a small-area plan for Village Place and the Rattlesnake Trail corridor, continuing streetscape improvements and developing a master plan for West Pinehurst Park are also in the five-year plan.
The privately operated Given Memorial Library has asked for a $50,000 increase in its annual appropriation from the village for its operations, which is now $100,000.
One of the big unknowns in the coming five years will be what happens with Given Memorial Library. The village will be hiring a consultant to study what the public wants and how much it is willing to pay for improved library services.
That could mean building a new library at some point in the future.
The board of the library has concluded that it cannot sustain the operation of what is a privately operated public library through its endowment, fundraising efforts and the annual allocation from the village. That will likely require greater financial support from the village and possibly making it a municipal library.
Mayor Nancy Fiorillo thanked Sanborn for such a “detailed presentation with a lot of rationale behind why we have to do what we have to do.”
“I think I could explain to any citizen why we need a tax increase,” she said.
But Council member Jack Farrell cautioned that he is “a bit concerned this year about being too aggressive with the tax rate” given the large increase expected in the county rate.
“We have some big, serious major expenditures staring us in the face, whether it is called a library or a fire station or a parking garage or whatever comes out of the Village Place study,” Council member Judy Davis said. “We cannot assume status quo.”
Mayor Pro-tem John Bouldry said the three main drivers that Sanborn addressed “are real costs that we need to prepare for.” He added that there are a “whole host” of continuing expenses such as resurfacing and repairing streets, and stormwater management.
But he said regardless of the pressures facing the village, residents are mostly going to focus on the number and what their tax bill ends up being.
Davis injected that it is equally important to show them what they are getting for the money. She added that she has concerns about the village not “contemplating setting aside more money” now for some of those future needs.
“You have to take money from somewhere or raise taxes,” she said. “I don’t want to be penny wise and pound foolish. We are saving money and we are looking really good for the next five years, then ‘kaboom.’ I feel like the kaboom happened to me the first year we were on council — not knowing and understanding what could hit us.”
Sanborn will present the budget and strategic operating plan to the council at its May 14 meeting. The council will hold a public hearing on the budget May 28.