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Originally published: 2014-03-04 17:46:09
Last modified: 2014-03-04 17:46:54

Boone council mulls revenue challenges, possible tax increase

by Anna Oakes

The Boone Town Council and staff on Tuesday discussed revenue challenges at its annual budget retreat, held to receive information and set priorities for the next fiscal year.

Town Manager Greg Young noted that the town's budget is impacted by the economy, high fuel costs and last year's change to local sales tax distribution.

The Watauga County Board of Commissioners' decision to switch distribution from a per capita method to an ad valorem method has resulted in a loss of $1.3 million in sales tax revenue to the town through February, Young said, and he anticipated the loss would be about $2 million by the end of the fiscal year.

Council members agreed to formally request that the commissioners reinstitute the per capita method of distribution by April 30, when counties must inform the state of any changes to sales tax distribution.

Council members also discussed the possibility of a tax increase. Last year, Young recommended a five-cent property tax increase to 42 cents per $100 valuation for the 2013-14 fiscal year, but the council instead voted to cut General Fund expenditures and dip into undesignated reserve funds to avoid the tax hike.

"I need feedback from you as the board if you want to use any money from the fund balance to balance the budget in lieu of passing a tax increase," Young said Tuesday.

Councilwoman Lynne Mason said raising taxes, which is a "high possibility," would impact residents and businesses in town.

"It's going to be a challenging year because we have delayed addressing some needs," she said.

Bond referendums were discussed as a potential method for financing needed capital projects that have been postponed.

"We have major capital needs. We're at an absolute standstill now because of the sales tax distribution method," Mason said. "These are still community priorities. I've had a number of people say let the voters vote up or down. Some of these are major undertakings."

The council also discussed incremental increases to town planning and building permit fees. Boone Planning & Inspections Department Director Bill Bailey has expressed concerns that the town's current fees do not capture the actual costs, including staff time, of processing the permits.

The council asked Bailey to draft a proposal to increase fees by 10 percent each year until the town is recouping approximately 50 percent of the costs of permit processing, with higher fees for expedited processing and potentially lower fees to incentivize redevelopment projects.

The council also heard presentations from department heads about capital, maintenance and staffing needs for the upcoming fiscal year. In recent years, Young has submitted a proposed budget for the next fiscal year -- which begins July 1 -- to the council by late May.