If the state’s legislature can’t help Wilmington patch a sudden, local revenue hole in its newly adopted budget, the city will have to find nearly $2 million in cuts or locate some sort of stop-gap.
The annual budget that Wilmington City Council passed unanimously Tuesday assumes the N.C. General Assembly will pass a “technical correction” to legislation recently signed by the governor that, in effect, keeps Wilmington from collecting on $1.7 million in privilege license tax revenue this coming fiscal year.
“If we don’t get the technical correction, it means we’ve got to reduce spending during the year to that tune or find another solution,” said City Manager Sterling Cheatham after Tuesday’s city council meeting.
It’s a different approach than one hinted at by city officials in recent budget workshops: to fill the revenue gap with money from the city’s savings account, and then de-obligate that money if the legislature comes through with a fix.
The problem opened up when state lawmakers in late May–as the city was finalizing its annual budget–passed a repeal on municipalities’ ability to levy a privilege license tax, which is paid by businesses for the “privilege” of performing their services within a town.
The full repeal doesn’t take effect until July 1, 2015. But the City of Wilmington has a billing cycle that is different from most–if not all other–municipalities in North Carolina. Before the repeal, Wilmington will only be able to collect revenue on two months’ worth of privilege license tax revenue.
Past story: Business tax repeal could affect city’s property tax rates
That creates the $1.7 million revenue hole in the new budget adopted Tuesday. For perspective, that’s equal to more than a penny on the city’s property tax rate.
The city has been in communication with N.C. Sen. Bill Rabon (R-Brunswick) and Rep. Ted Davis (R-New Hanover), who sit on their respective chambers’ finance committees. They’re aware of Wilmington’s problem, but a solution–that so-called “technical correction”–has yet to come together. (Lawmakers last week were immersed in budget talks and had time for few other items.)
Story: City reaching out to legislators on local revenue hole
If the legislature can’t apply a special fix to allow Wilmington to collect that final year of revenue like other cities, then local officials will have to discuss spending reductions.
Cheatham on Tuesday did not name what they might be.
The legislature plans to adjourn for the year before July 4.
Tax increase
Wilmington beginning July 1–the first day of the new fiscal year–will pay a 46 cent property tax rate.
Council’s budget adoption Tuesday came with a 1 cent tax increase.
The owner of a $150,000 home in Wilmington would pay $1.25 more per month under the new rate.
Revenue generated will help support a $91 million general fund (which also took $610,000 in city savings to balance).
Cheatham on Tuesday thanked the city’s budget writing team for shaping a plan that provides raises to city employees, which the city considered its priority goal.
According to the city’s human resources department, 76 percent of the roughly 1,000 municipal employees here generally earn less than what peer cities pay. That affects morale and the city’s abilities to hire and retain good workers, say department heads, particularly in the field of public safety.
Story: City’s public safety workers protest pay levels
A presentation to council members in April put a $1.8 million price tag on the overall salary adjustment.
Despite having to apply savings to feed the budget, the city’s savings remain at a safe level, according to an update from the communications office Tuesday.
By the end of the new fiscal year, that savings account–or fund balance–is projected to sit at about $22 million, which exceeds the policy of having the equivalent of 15-20 percent of operating expenditures.
Recent budget stories:
Council gives preliminary approval to uncertain budget
City budget writers present plan with increased tax rate, fees
Golf course fees to rise in new fiscal year
Scope of city budget increases
City budget hearing draws few voices
City expects better sales tax revenue
Ben Brown is a news reporter at Port City Daily. Reach him at [email protected] or (910) 772-6335. On Twitter:@benbrownmedia
