Lenoir roofs, roads, other repairs fall victim to state paralysis

Jul. 05, 2013 @ 08:19 AM

Lenoir police officials had hoped to make building repairs this year, do some remodeling and replace four patrol cars.

The city's two recreation centers need roof repairs.

And the tennis court at the Martin Luther King Center could stand some work.

But until the ax of state revenue reform falls, the City of Lenoir is putting those and other projects, including all road resurfacing, on hold – and depending on how severe the losses are, those spending freezes may last the full fiscal year, City Manager Lane Bailey said.

Where the spending freeze is most likely to be felt, literally, by residents is in the pause in road resurfacing, Bailey said.

“I think we’re way behind in street resurfacing, and if it put us further behind on that, that would be one of the things that is most notable,” he said. “I think we’d try to minimize what the average citizen could see, but if you defer capital – you can only do that for so long.”

Leaders in the General Assembly are split on tax reform details in the 2013-14 state budget, but no matter what compromises are made, all of the versions that have been discussed would come with revenue losses for many municipalities. The worst-case scenario for Lenoir is a $700,000 loss under the terms favored by the Senate; a middle-of-the-road compromise between the House and Senate would mean a $350,000 loss for the city.

The fiscal year starts on Monday, but the General Assembly gave up last week on trying to reach a compromise by then. Gov. Pat McCrory signed a short-term spending plan on Wednesday to keep the state government running through July at 95 percent of its current funding level. The House has announced it won’t bring its members back to Raleigh until July 8.

The Lenoir City Council adopted a budget on Tuesday, after putting off the vote twice in the hopes the state would pass a budget first so that council members would know what the city's losses would be.

Some projects in the city's capital improvement plan will move forward despite the spending freeze. Improvements to the Lenoir Aquatic and Fitness Center, the Lenoir High School gym and the Lenoir Greenway are to be paid for entirely with grant money, so they are not affected by what the state might do.

The bridge replacement planned for Fairview Drive would have to go forward because bids already have been awarded.

Planned water and sewer improvements would be unaffected as well, since those are paid for with money from city’s water and sewer fees, Bailey said. Those projects include sewage repairs at the Gunpowder Creek treatment plant – mandated by the Environmental Protection Agency after the plant was cited for repeated environmental violations.

Of greater concern is that whatever revenue losses are imposed by the General Assembly essentially would be permanent, meaning that getting the frozen projects back on track eventually might require property tax increases, Bailey said.

“There would be an increased burden on the taxpayer,” he said. “It will take away other sources of revenue that we used to have and put more of a burden on the property tax as a revenue source.”

The city previously had projected property tax increases for the 2014-15, 2015-16, 2016-17 and 2017-18 budget years. Most years, an increase of around 2 cents is planned, but that number may rise, depending on how much other revenue is lost, Bailey said.

It’s not just tax reform that is carving into Lenoir’s 2013-14 budget. The city also stands to lose nearly $650,000 from the end of state payments that compensated local governments each year for revenue they lost from the 1988 repeal of the inventory tax. The city has known that loss was coming for about eight years and found ways to absorb the loss.

The city also lost tax revenue this year after the total value of property dropped in a countywide revaluation by Caldwell County.

North Carolina municipalities often are in a budget bind caused by the state because legislators frequently misses the July 1 budget deadline. In 2001 and again in 2002, then-Gov. Mike Easley also claimed emergency budget powers and withheld all state-collected revenue from counties and municipalities.

But the wait is, if anything, more fraught this year because of the proposals being debated in the General Assembly – changes to things like franchise taxes, privilege licenses and sales tax refunds.

 “This is unique in that they’re making changes that are going to be permanent,” Bailey said. “It’ll have lasting changes on local government. They’re really redefining how state and local governments collect revenue and pay for services.”