Tryon town council voted Monday, July 29 to raise the town’s tax rate two and a half cents to offset a potential loss of $44,000 in revenues from the state.
Councilmen Doug Arbogast and George Baker voted for the plan, while councilman Roy Miller voted against the increase. Wim Woody was absent from the special called meeting.
“That’s [the 2 ½ cent increase] basically what it will take to make up what the state cut this year,” said Mayor Alan Peoples. “And, as far as I can tell you, this is the first tax increase in Tryon in 12 years.”
The NC State Legislature adopted its budget last week and agreed to fund Hold Harmless revenues to towns at 50 percent of past levels. In recent years Hold Harmless funds garnered from the state amounted to $88,000 of Tryon’s budget. This revenue was created by the state to offset any potential loss for cities and towns as the state collected sales tax monies from counties to cover its costs of taking on Medicaid. When the Hold Harmless funds come in from the state around Sept. 14 Tryon expects to receive only about $44,000.
“We’re assuming that’s the gospel and it won’t be funded,” said Tryon Town manager Joey Davis.
Councilman Doug Arbogast motioned to approve the two and a half cent increase so the town could be prepared for what was coming down the road.
“Simple arithmetic shows we’ve got to make it up somewhere and that two and a half cents does that,” Arbogast said. “We would have had to pull the money from somewhere else in the budget – that could have meant someone’s salary or services. This allows us not to have to do that.”
Davis added the council had already taken some preemptive measures in the budget such as putting on hold about $20-30,000 in capital outlay projects. Davis said the town would reassess those projects later in the year, depending on revenues that come in.
The legislature also said it would eliminate all Hold Harmless funds next year.
“Tryon’s budget is about $1.6 million, so when you take about $90,000 out that is a big chunk for us,” Davis said. “If the state doesn’t do anything different, we’re going have to look at another $40,000 shortfall when we begin the next budget process. This was not an issue that was resolved by what [the council did Monday].”
One penny in tax revenue for Tryon is approximately $16,000, so it would take 5 cents in property taxes to make up the total $88,000.
Councilman George Baker said he originally suggested a 1-cent increase, but went along with the higher rate because he felt the town had few other options.
“I personally didn’t want to see us get behind and we needed to make up what the state says it will cut,” Baker said. “We had to do something because it takes a lot of money to run this town unfortunately. If we get as much as we think we’re going to get, I think we’ll be lucky.”
Towns were given until Jan. 1 to adjust their tax rates based on monies received from the state in September.
Councilman Miller said he would have preferred to wait to make a decision after the town sees exactly how much Hold Harmless funds it actually receives.
“I think we are really shooting from the hip,” Miller said. “We approved a tax rate at a special called meeting without research. Why not wait until Hold Harmless money comes in and make a move from there? If you ask me, we’re taxing our citizens into poverty.”
Davis said the town considered several other options such as withdrawing the money from its fund balance and cutting all of the $44,000 out of its budget. He said the town doesn’t have a large fund balance and that amount of money would have only further reduced that safety net. Peoples added the town already gets letters from the state every year reminding it that its fund balance isn’t as large as other towns its size.
In late June, Tryon approved its budget with plans to increase water/sewer rates by 1 percent and sanitation rates by 2 percent. The two and a half cent increase on property taxes brings a person’s tax rate up to 50.28 cents per $100 of valuation from 47.78 cents per $100 of valuation. A person with a $100,000 home, therefore, would now pay $550.80 in taxes – this amount includes the new tax rate and fire tax.
“I’m sure we’re going to have to work with people,” Davis said. “So we might have to allow for some extensions as people adjust to these new rates.”