Chapel Hill considers 11% tax rate hike

With the fate of the transfer tax not even decided, CH town manager Roger Stancil is already calling for an 11% tax rate hike for Chapel Hill. He warns that property tax rate increases of 3 to 10 cents (per $100 valuation) will not be uncommon in local jurisdictions. (And my guess is that this is a trend that will continue for the forseeable future. )



it would have had no impact on Town of Chapel Hill revenues. Revenue from the tax would only have impacted the County's coffers.
Why did the commissioners put the transfer tax on the ballot knowing that there was not enough time to have a good public discussion of the nuances of taxation and thus knowing that it was doomed?
This is a question many have asked, I wish we had an answer.

The transfer tax was voted down in what effectively amounted to a Democratic primary. I don't think any amount of time would have saved it.

I agree with this. I also heard some anti-tax activists saying that the Commissioners had "rushed" the tax to the ballot in May, because they didn't want the public to have enough time to be exposed to the negative sides of the tax.

It is not like the anti-tax advocates wanted this to be on the ballot in May, in fact, they wanted it to be on the ballot for November.

it would be considered undesirable to run for higher office having been a facilitator of a transfer tax. The best of both worlds for the ambitious politician would be to appear to the progressive citizenry to be an advocate of creatively funding important social needs while avoiding the ire of powerful special interests who would not forget someone who successfully crossed them.  
I thought the transfer tax had more than a fighting chance in Orange County -- well described by key advocates and cleverly described by proponents who mostly saw ways to get around it.  Home tax, indeed.  This is the only pisser of yesterday's voting results.  Pardon my language. 

It's worth the time to take a look at the the Manager's 2008-2009 Recommended Budget. For one thing, it's clear that debt service is the big driver - debt that we said that we needed/wanted in order to build new facilities. I found the Manager's budget logic to be sound, just as I did last year. To avoid raising taxes last year when we should have, we went deep into our fund balance.

Earlier in March, I wrote:

It’s budget time again and the good bet is that our taxes will increase. For those who desire/need a historical refresher, read the 2007 OP thread, "No Chapel Hill Tax Increase!" I never got an answer on what not raising taxes in 2007 would do to the cost of things in 2008. Take a look at the budget documents for this year. The Mayor was quoted in the morning CHH saying that it might take a five cent increase per $100 valuation to fund the forecasted deficit. And of course, rereading last year’s thread reminded me hom many folks told me that not having an increase last year had absolutely nothing to do with the fact that it was a Council election year! Let the games begin! Council members are expected to adopt the budget on June 9.

Now, Debt Service for FY09 is $5,670,830; 1 cent equals $ 582,000, so the dedicated tax needed to fund DS is 9.8 cents. In order to get to that 5.9 cent increase to balance the budget, he lowers the current 47.4 general fund rate to 43.5 cents.

So I ask, if we had taken action last year, would we have had to reduce the allocation to the general fund by some 8%? And remember - it had nothing to do with the election! Wink, wink :-)

As the Manager says in his report (without pulling any punches):


The FY2008-09 budget takes several important steps toward correcting the structural imbalance between revenues and expenditures. While the Town has been able to avoid tax increases over the past two years to pay increasing debt costs of new facilities, we no longer have sufficient reserves or current revenues to support established service levels without a significant tax increase. By making changes in how we allocate our tax dollars, we can better match our most consistent revenues with the highest priority payables. In addition, by funding our CIP with current year surplus funds, we can create a separate funding source for CIP projects and avoid deferred maintenance issues that arise when CIP projects compete with operating budget priorities.

So, save your pennies so that you will have the dollars needed to pay all of your new taxes!

Let me ask a dumb question.  If we weren't able to afford these new facilities then why did we build them?

 It's being portrayed as if the tax increase is going to be used to pay for debt service.  But that's not true.  If it were true then all of the tax increase would go to paying the debt until the debt was gone and then the tax rate would revert to earlier levels.  Instead we all know that this is going to be a permanent tax rate increase.  After the debt service is paid then the town will spend the extra money for something else.  And then eventually the town will again spend more than it should and then they'll come to us again saying "We have to raise tax rates."

I've lived in Chapel Hill for a long time but it was just two years ago that I bought a home here.  I've never paid close attention to local politics here or other places I've lived but I've often heard people complain about property taxes and I never gave it much thought.  Now I know exactly what they mean.

First I was shocked to see how much local taxes would be.  They're 5% of my GROSS pay!  And I didn't buy an espeically expensive house relative to my income.  And remember, this doesn't include any federal and state taxes.  5%!  That's just crazy. 

Well okay, I thought, at least it'll be 7 years or whatever until my house is re-assessed and the bill goes up again and my income will be going up in the meantime, so while 5% is a lot, I'll get used to it. 

 But then the county proposes the land transfer tax.  Yes, I would only pay that when I sold my house someday but in effect it is a tax that accrues annually.  At least I avoided that because it was defeated at the ballot box, although I hear people saying the county will raise taxes anyway 

 And now it's an 11% property tax increase imposed by the town of Chapel Hill

 So we're now two years into my tenure of home ownership.  Town taxes are going up 11%.  The county sounds like it's going to raise taxes.  And we're two years closer to when my house is re-assessed, at which time I assume there will be a big increase in my property taxes since it will have been several years since my house was assessed.  I feel like I'm under siege.  And with regards to local government I've grown very jaded very quickly.  I already knew that state and federal politicians spend public money like drunken sailors but for some naive reason it hadn't occurred to me that local politicians do the same.

 The next time we want a new aquatics center or a public library expansion or whatever can we please just wait until we can afford it and then buy it?

You just described why I purchased my house slightly outside the Chapel Hill city limits. The high cost of taxation in Chapel Hill relative to the benefits I would receive from those taxes completely turned me off when I was shopping for a home.

The previous poster is right, however. Don't let your disgust turn you off to being involved. Voice your concerns!

Enjoy the drive (@ $4 per gallon).

It's much easier to live out of the city limites and get to places than to live in the city and crawl along down the street, even if you're on a bus.

And hey, even at $4 a gallon, gas is still cheaper than milk!

Considering that I pay about $800 / year on gas to get to and from work, I don't think your argument really holds up. I'd pay slightly less on gas if I lived within Chapel Hill, but I would pay thousands on taxes and thousands more on the price of the home.

I'll happily pay a few extra bucks on gas -- at least I'm getting a direct benefit from it.

Like what?

Transportation, of course.

I'd be buying gasolene for transportation whether I lived in the city limits or outside them. If I lived inside the city limits, I'd be buying slightly less. But the additional taxes I would be paying inside the city limits would far exceed the cost of the extra gas I have buy because I live outside them.

welcome to home ownership. 

 I suggest you get involved and contact the Town Council and share your opinions.  They are a very dedicated group and they want citizen input.   They don't know what we want unless we tell them.    They are a very hardworking group and very receptive and accessible. 

As predicted, there's more evidence that tax rates for all of Orange are going up.

The implication of Barry Jacobs comment seems to be that OC property taxes would have to rise 6.4 cents just to keep up with rising health care, benefits and debt service costs.

And I question whether any of the local governments are adequately factoring in permanently rising energy and fuel costs.

Edit: Note that none of the reasons for the tax hikes would have been helped at all by the LTT. None. 

The LTT would certainly help with the County budget - much of the upcoming increase in County property taxes will be for schools.


You're right. The LTT would have only knocked 2.5 to 3 cents off what could be as much as a 10 cent increase for FY2009. Next year, it would only knock 2.5 or 3 cents off the expected increase for FY2010. Then, in FY2011 . . .

Anyone look at the personnel budgets in the manager's proposed budget? 

I am a supporter of Public Arts--especially in rural areas where free art is not abundant as it is in a college town.  However, I am deeply disturbed by our town's decision to hire an "art czar" for what appears to be roughly a $60,000.00 salary plus benefits while cutting the police personel budget by $59,185.78 from the 2007-2008 revised budget.  This proposed budget provides for no increase in the number of police officers in the town(despite the number of home break-ins doubling in the last year per the CH News last week) and doesn't seem to provide for any cost of living adjustment or pay raises for the police officers currently serving our town.

 All this and an 11% tax increase?!  I'm all for hiring an "art czar"--but not until we build our business tax base and can afford it!

I love Chapel Hill, but I'm really glad I grew up out in the County. I can see why the town needs an art czar -- if I'm not mistaken, 1% of all new building budgets have to go toward public art. Ever notice all the statues and benches and stuff outside of town hall or the police station? Just sitting there doing nothing.  Million dollar building? $10,000 art. I shudder to think how much was spent when UNC stopped leasing all of those offices for $1 to the town. There were a *lot* of town offices that needed to be relocated. That translated into several hundred thousand dollars' worth of art that needs managing, if I recall.



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