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Originally published: 2014-04-01 18:42:37
Last modified: 2014-04-02 11:40:26

Boone taxes could go up

by Anna Oakes

The Boone Town Council could consider a property tax increase ranging from four to six cents or more as part of the 2014-15 budget.

Council members and town staff discussed the likelihood of an increase during a special meeting held Tuesday to continue budget discussions from the council's annual retreat on March 4.

Constraints on the town budget include the economy, high fuel costs and the change enacted last year to local sales tax distribution, which Town Manager Greg Young said is projected to result in a $2 million loss in town revenue this fiscal year.

Currently, Boone's property tax rate is set at 37 cents per $100 valuation.

Young had recommended a five-cent property tax increase for the 2013-14 fiscal year, but the council instead opted to cut General Fund expenditures and dip into undesignated reserve funds to balance the budget without a tax hike.

Young said Tuesday that it would take a four-cent property tax increase to maintain current spending levels, with an additional one- to two-cent increase if the town wishes to fund employee salary increases. Each one-cent increase in the property tax rate represents approximately $140,000 in revenue, Young said.

"I think we're going to have to raise taxes four cents to break even," he said.

Young reminded the council that they cut back significantly on funding for capital projects last year, and he recommended that the town earmark approximately $200,000 to $300,000 for capital equipment needs next fiscal year. He also suggested adding $1 million to a reserve fund for a new Public Works and Public Utilities Departments facility, for which $700,000 has already been set aside.

The town manager also advised the council to maintain its undesignated reserves amount, which the town typically aims to keep at an amount equal to 35 percent of annual General Fund expenditures. Young noted that many municipalities across the state have reserves closer to the 50 percent mark and suggested that the council consider bumping its reserves up to 40 percent.

Town Finance Director Amy Davis said a four-cent tax increase for a $300,000 property would amount to an extra $150 per year.

Council members said they would like to see additional breakdowns of the tax increase impacts for various properties and the estimated revenue needed for other potential town projects prior to budget workshops in June.

The Watauga County Board of Commissioners decided to switch local sales tax distribution from a per capita method to an ad valorem method in spring 2013. Counties must inform the state of any changes to sales tax distribution by April 30 of each year.

Councilwoman Lynne Mason said that 60 percent of sale tax revenue within the county is collected in Boone but that under the ad valorem method, Boone is only receiving 12 percent of the revenue.

"I think that citizens and businesses in this community really need to be outraged with the sales tax distribution method," she said. "It's unfair, and it hurts both our businesses and our citizens."

Last month the council passed a resolution formally requesting that the commissioners reinstate the per capita method of distribution. The commissioners met on Tuesday but did not discuss the town's request.