State tax plan a 'pleasant surprise' for cities and towns

Jul. 23, 2013 @ 08:32 AM

Projects that Lenoir had put on hold are back under way and the city’s revenue picture is brighter now under the compromise tax package that the General Assembly is poised to pass.

In fact, most cities and towns will see a small increase in revenue because the tax plan maintains three municipal revenue streams that were initially on the chopping block – the privilege tax, the food tax, and sales tax refunds – and extends the sales tax to some previously exempt services, said Paul Meyer, director of governmental affairs for the N.C. League of Municipalities.

“The compromise that the House and Senate developed very much protected municipal revenue streams, and that was very pleasing to elected officials in cities statewide,” he said.

The main features of the tax plan are cuts income and corporate tax rates and the elimination of some deductions, but those were not the provisions that had caught the attention of municipal officials across the state.

Lenoir officials had been bracing for tax changes that in some scenarios could have cut the city's revenue by about $700,000 a year. Instead, under the compromise plan the city would receive $15,540 more this year than previously projected.

Other towns in Caldwell County are expecting similar turnarounds in their revenue. Sawmills, Granite Falls, Rhodhiss and Hudson would all see modest increases in revenue each year through 2018-19, instead of losing huge chunks of revenue from fiscal 2014-15 on. 

Sawmills Town Administrator Seth Eckard called it a pleasant surprise.

“It’s a small amount of revenue we’re expecting to get, but it’s better than losing revenue,” Eckard said.

Because Lenoir faced by far the largest potential loss of revenue, City Manager Lane Bailey had put the budget items involving road resurfacing, police department repairs and maintenance to other city facilities on hold. Those now can go forward.

But another aspect of the city’s revenue stream is still uncertain: $648,900 each fiscal year that is supplied to the city from the state, compensating for lost revenue from the 1988 repeal of the state inventory tax. That money would be in the separate budget agreement scheduled to be voted on later this week.

Officials in other municipalities are worried that the proposed budget would end all funding for the N.C. Rural Economic Development Center, an organization that provides resources to rural municipalities. The center has faced mounting controversy over the way it spends its allocation from the state. State auditors said the Rural Center failed to provide proper oversight for the millions of dollars in grants it awarded, while paying longtime president Billy Ray Hall an “unreasonable” salary of $221,000, theCharlotte Observerreported. Hall resigned under pressure last Thursday.

Rhodhiss Town Manager Barbara Harmon said Rhodhiss benefited immensely from a $500,000 matching grant it received from the Rural Center for a new sewage treatment plant. The town was struggling with sewage overflows and had already spent $120,000 on pumping filter beds to maintain clean water.

The old treatment plant “was so antiquated that there was no choice but to do something, and the Rural Center was vital to that,” Harmon said. “Without their help, we couldn’t have done that.”

The Town of Rhodhiss also received a matching grant of $15,000 from the Rural Center this year to fund an assessment of the town’s water and sewer systems and more accurate mapping of the systems.

The elimination of Rural Center funding “certainly casts some questions on the future” of grants that have been promised but not yet filled, said Meyer, the League of Municipalities representative.

Granite Falls Town Manager Jerry Church said his town has benefited from Rural Center grants – including building reuse grants, which help municipalities restore vacant buildings, including those once occupied by industry. But Church said that if the useful functions of the Rural Center are picked up by the new economic-development structures that the governor and General Assembly are creating, Granite Falls will be all right.

“If the program is the same, it doesn’t really matter who administers it,” he said.