Residents of Orange County and Chapel Hill may soon be facing higher property taxes as the local budgeting process gets under way.
“It’s not a perfect budget, but I’m willing to work with you all and make it better,” said Orange County Manager Bonnie Hammersley to county commissioners last week as she presented her $279 million proposal, which includes a three-cent property tax hike.
Hammersley said this budget is characterized by “cautious optimism” about the future – in contrast to last year, when local officials had to craft their budgets in the midst of a still-new pandemic.
She said the good news, however, is that many of the worst fears did not come to pass. For example, where officials expected a 5 percent drop in sales tax revenue, the county actually saw a significant increase instead.
“Sales tax collection represents the bright spot in the revenue forecast,” Hammersley said.
The proposed property tax increase is not directly COVID-related; rather, it would go to help pay down the debt from a $120 million school bond that voters approved back in 2016. County leaders had planned for gradual tax hikes over a period of several years to cover that debt, but they elected not to raise taxes last year amidst the pandemic. Now, Hammersley said the county has to make up for that delay.
“The money’s been borrowed, the money’s been spent, and we start paying it back this year,” she said.
Hammersley said she has taken steps to limit that additional tax burden, including the use of federal COVID relief funds from the American Rescue Plan and an across-the-board 5 percent budget cut for many county departments.
The plan would also close the McDougle library branch, reduce hours at the library’s main branch in Hillsborough, and put off pay increases for county employees. Hammersley did clarify, however, that her budget will still raise wages as needed to continue qualifying as a living-wage employer.
Hammersley’s budget also does not include any per-pupil increase in school spending, for the first time since the county’s recession-era budget in 2009.
Learn more about County Manager Hammersley’s proposed budget.
Meanwhile in Chapel Hill, Town Manager Maurice Jones is also proposing a three-cent property tax increase – not to pay off debt, but rather to restore some of the funding and town services that were cut or postponed last year amid the pandemic.
Jones’ $117 million proposal (up 5 percent from last year) includes a 3 percent pay raise for town employees, who went without one in 2020. Among other things, it restores funding for new positions, building maintenance, vehicle replacements, and the town’s climate action plan. It also includes more funding for street resurfacing and human services.
“We are trying to be mindful of the effect the increased [property] valuation will have on commercial and residential property owners,” said Jones, “while also helping the town restore the cuts that were made [last] fiscal year – and to begin the process of investing in a number of our strategic initiatives that both the [Town] Council and the community have called for.”
Learn more about Town Manager Jones’ proposed budget.
Some town leaders and residents expressed concerns about a 3-cent tax hike at last week’s town council meeting. Chapel Hill Mayor Pam Hemminger said she was especially worried about residents in the Northside and Pine Knolls neighborhoods, who are currently appealing after seeing their properly values spike in this year’s revaluation.
“If Northside and Pine Knolls don’t (win their appeal), this tax increase is going to kill them,” Hemminger said. “And that’s just not okay.”
Katie Loovis of the Chamber for a Greater Chapel Hill-Carrboro spoke during the public comment portion of the meeting, saying a property tax hike would affect local businesses still struggling to emerge from the pandemic.
“Our local businesses who are tenants in properties are going to receive that exact (tax) increase” from their landlords, Loovis said. “And that’s a pain point. It’s really painful.”
For both Orange County and Chapel Hill, the budget process is only just beginning. Orange County will hold a public hearing on the budget at 7 p.m. on Tuesday, May 11. County commissioners will hold budget work sessions beginning on Thursday, May 13. In Chapel Hill, the town council will hold its first work session on Wednesday, May 12, with a public hearing to follow the following Wednesday, May 19.
This year’s budget process has an extra step because of the just-concluded property revaluation. First, the property tax rates have to be adjusted down to make them “revenue-neutral,” then the towns and county can adjust them again to reflect their budget needs. For both Chapel Hill and Orange County, this will actually result in a lower property tax rate – but a higher tax bill in real dollars for the average property owner, because of the change in property values.
Both the Chapel Hill and Orange County plan to have their final budgets approved next month – June 9 for Chapel Hill, June 15 for Orange County. The new fiscal year begins on July 1.
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