FY12 spending would focus on “maintaining assets,” including roads, parks, police cruiser. Also possible: first raise in 3 years for town employees.

Finance director Eric Hardy showed a slide noting that the town is spending less than expected from its reserves. (David Boraks/DavidsonNews.net)

By DAVID BORAKS
DavidsonNews.net

Davidson officials outlined a proposed 2011-12 town general fund budget on Tuesday night that would keep the tax rate flat – despite rising property values in the recent revaluation – and boost spending 4.5 percent from this year, to $9 million.

In a presentation at the Town Board work session, Finance Director Eric Hardy said the proposal would cover essential expenses; fund badly-needed work on streets, sidewalks, parks and buildings; and pay for police cruisers and firefighting gear, among other things.

Town employees would get a 3 percent pay increase – their first in three years. And the budget for the fiscal year beginning July 1 also would include a projected $1.9 million subsidy for MI-Connection Communications System, which Davidson owns along with the town of Mooresville. That’s about $100,000 less than this year.

The presentation and Town Manager Leamon Brice’s budget message to the board were a bit rosier than in the past couple of years, thanks in part to rebounding revenues. Mr. Hardy said revenues are ahead of budget by about $500,000 for this fiscal year. That includes a rebound in sales taxes, “which is a very significant trend. Each month we’re seeing increases over the prior year,” he said. Other revenues also are rising, he said.

The manager’s proposed budget  would keep the town property tax rate flat compared with this year, at 36.5 cents per $100 of assessed value, though it actually would boost town tax revenues by 19 percent because of gains in local property values in the recent countywide revaluation, finance director Eric Hardy said in his presentation.

[The town tax rate is only one piece of the equation for property owners. Mecklenburg County collects another 83.87 cents per $100 of value. County officials will discuss the budget outlook at a public meeting tonight (Wednesday, April 27) in Cornelius.]

All the figures presented Tuesday night are preliminary and subject to change depending on how commissioners feel about the proposed tax rate – a de facto tax increase – and further discussions about where they want to spend money this year.

The board will hold a public hearing on the budget at its May 10 meeting. Commissioners likely would pass the budget at their June meeting; it must be approved by June 30, the end of the fiscal year.

Commissioners raised no objections to the proposed tax rate Tuesday or other major trends in the proposal. At the meeting’s end, Mayor John Woods signaled that the picture could change, noting that “this is just the beginning” of the budget process.

The general fund budget is that portion of town spending supported by property taxes and most other operating revenues.  The overall proposed 2011-12 budget, including dedicated funds for roads, solid waste, storm water, and affordable housing fees, totals $10.3 million, up 3.9 percent from this year.

TAX BILLS RISING?

Many property owners in Davidson will pay more in property taxes in the next fiscal year no matter what happens to the tax rate, because of big increases in  property values in the revaluation. Just how much more they’ll pay will depend on where the board and the County Commission ultimately set tax rates and how much value individual properties gained.

Residential home values in Davidson’s 28036 Zip code were up an average of 25 percent in the revaluation, well above the county average. County officials have said that after appeals, they expect the average tax bill to be up 6-8 percent. (See Feb. 10, 2011, “County says your house is worth HOW much?”)

Values in some Davidson neighborhoods changed little, but doubled in others, especially the old part of town. Meanwhile, commercial properties also are up in value, and some along Main Street doubled in value. The big increases could lead to tax bill shocks when bills go out later this year.

By law after revaluations, N.C. cities and towns are required to state a so-called “revenue-neutral” tax rate – what the rate would be if it were adjusted to keep property tax revenues unchanged. Davidson’s revenue neutral rate would be 32.7 cents, adusted for natural growth and annexations, Mr. Hardy told the board Tuesday night.

In the budget presented Tuesday, the town staff is recommending not lowering the rate, but keeping it where it is (36.5 cents). That would bring in about $866,000 in additional revenue in the coming year.

The difference between the lower “revenue neutral” rate and the proposed rate equals $38 per $100,000 of assessed valuation. That’s a $114 annual difference for the owner of property valued at $300,000.

REDUCING NEED FOR FUND BALANCE

As presented, the proposed budget would reduce the need for dipping into the town’s Fund Balance, or savings. Mr. Hardy said improved revenues have helped the town avoid spending as much of its reserves as it had originally budgeted for this year, and the situation should improve next year as well.

The 2010-11 approved budget called for spending $804,179 from the Fund Balance. Mr. Hardy now expects the town will need only $265,438. In 2011-12, he is recommending spending $407,454 from reserves – all of which would be spent on one-time items, not the town’s day-to-day operating expenses.

If the town follows through on that plan, it would result in spending a total of $672,892 from reserves over two years – less than the town originally thought it would spend this year alone, Mr. Hardy said.

MAINTAINING ASSETS

Mr. Hardy and Mr. Brice said Tuesday the budget they presented tries to catch up on some town needs that have been deferred, such as roads and sidwalks, and addresses the Town Board’s goals.

“We focused on maintaining existing facilities and routine equipment replacement programs, and lastly funding board goals and investment opportunities,” Mr. Brice wrote in his message to the board.

Maintenance would include repairs and improvements on streets, parks, and town buildings. The budget also would replace five police cruisers, an expense the town has put off in recent years because of tight budgets. Mr. Hardy said the town could buy two cruisers outright with money from reserves, to catch up, and three others with loans.

The budget also would buy new firefighting equipment and continue funding for part-time firefighters. It does not, as Commissioner Laurie Venzon pointed out, provide money to hire a full-time fire chief, something on the town’s long-range wish list.

In a handout and slide presentation, Mr. Hardy offered a “funded and debatable needs list,” which prioritized spending for the coming year.

The salary increases for town employees would cost $88,901.

OTHER ITEMS

The budget as proposed Tuesday includes a few items that have attracted some public attention rcently, some of which address specific goals of the Davidson Town Board. They include:

• $63,530 for Visit Lake Norman, a $10,050 increase over last year.
• $55,000 for wayfinding signs downtown.
• $20,000 for a study of the Davidson IB Middle School, which the town hopes to lease from Charlotte Mecklenburg Schools after it closes this summer.
• $50,000 for local nonprofits, up from $43,125 this year. The town traditionally has provided grants to groups such as the Ada Jenkins Center, Davidson Housing Coalition and Davidson Lands Conservancy. This year, the town has appointed a committee for the first time to evaluate nonprofits’ applications and recommend funding to the board.
• $15,000 to help pay for a victim’s advocate for north Mecklenburg.
• $12,190 to resume the town’s public art program. That equals 5 percent of the town’s occupancy and prepared food tax revenues.

RELATED LINKS AND DOCUMENTS

Download the town manager’s budget message, a note to commissioners explaining the proposed budget (PDF).

Download a copy of a budget summary handout from Tuesday’s meeting (PDF).

Feb. 10, 2011, “County says your house is worth HOW much?” – a report on the county revaluation.