Wednesday, August 17, 2022

City leaders won’t give up affordable housing money, planned projects to reduce proposed tax rate

Mayor Bill Saffo addresses council that the proposed tax rate in the fiscal year 2022-2023 budget is necessary to complete needed projects.

WILMINGTON — One city council member failed to convince his colleagues to reduce the proposed tax rate increase in next year’s budget. 

At this week’s meetings, Luke Waddell offered multiple solutions to keep the burden on taxpayers to a minimum.

“People are struggling to put gas in their tanks, struggling to pay their mortgage, pay their rent, struggling to get the groceries they want,” he said. “These are real, palpable issues we’re dealing with.”

But the 1.42-cent tax increase ultimately passed in a 6-1 vote, Waddell dissenting. Council will review the budget one more time June 21 with a second reading before it becomes official and adopted by the city. 

READ MORE: City passes $241M budget with slight tax increase, council raises, boosts affordable housing investments

The current tax rate for the City of Wilmington is 38.08 cents per $100 valuation of property. Staff’s recommended increase raises the rate 3.73%, to 39.50 cents per $100. Last year, the city raised taxes a half-cent.

At the request of Waddell, budget director Laura Mortell presented alternative options to council at Monday’s agenda briefing, which would lessen the financial impact to taxpayers. By using $500,000 from unassigned funds in the fund balance — essentially a “savings account” for the city to use on unexpected expenses or emergency items — the city could save the residents a quarter, increasing the tax rate only 3% or 1.17 cents per $100.

Another suggestion by Waddell was to use $500,000 of a total $6.5 million allocated to affordable housing to keep the rate down. The funds are set aside for gap financing, an incentive for developers to build reasonably-priced units.

Council members Kevin Spears and Clifford Barnett were opposed to Waddell’s idea of taking $500,000 from the affordable housing allocation, arguing it was a much-needed initiative. 

Spears applauded Wadell’s “quick thinking” but joked he could see the headline now: “City council takes half-million from affordable housing.”

“It’s going to look bad,” he added.

“We’re all going after the same thing, just from different angles,” Waddell retorted. “It’s an outside-the-box idea. It’s a win for affordability. I don’t know how to calculate the value, but I bet the proposed rate increases from the 1.42-cent tax rate would far outweigh anything we could do in $500,000 in gap financing.”

Council member Neil Anderson sided with Waddell and told council an increased tax rate would be absorbed by renters.

“Our market, there is so much demand, and the cost gets passed along and makes it less affordable, making it harder,” he said. “We have other things and commitments, but any tax increase will raise rent across the city, it’s a valid point.”

City manager Tony Caudle stepped in Monday when council began questioning community development and housing planner Suzanne Rogers about future affordable housing projects and if $1 million would be enough, if they took away $500,000. The city had proposed adding another $1.5 million to the affordable housing this year to address growing concerns over the crisis.

He reminded council the budget process is a “balancing act.”

“What you have before you is the manager’s best guess at what it takes to accomplish all objectives with regard to next year’s funding,” he said. “While I appreciate affordable housing as a big priority, any divisional manager that comes before you is going to say you’re not going to have enough money.”

Healthy debate ensued during council’s agenda briefing Monday and carried into Tuesday’s council meeting. Waddell and Anderson seemed in favor of keeping the tax rate increase to a minimum, while members Barnett, Spears and Charlie Rivenbark, along with Mayor Pro Tem Margaret Haynes and Mayor Bill Saffo, expressed the need for the added revenue.

“I appreciate this debate,” Saffo told council. “No one wants to raise [taxes]. It’s the last thing they want to do, but we also have a growing city here, growing by leaps and bounds. There are a lot of demands on this city.”

He added the city has a responsibility to maintain its growing infrastructure for everyone who uses it, including the “50,000 cars that come into this city every single day that are not residents of the community.”

The main issue brought forward by Caudle, along with budget director Mortell and echoed by Saffo, is the city has $13.1 million worth of projects in the works. With inflation at an all-time high and construction costs rising, those numbers will continue to grow. Many projects were voted on by residents in the 2014 Transportation Bond.

“There’s a lot of pressure on council to finish projects,” Saffo said. “People have been waiting years for some of these. No one anticipated an 8% inflation rate. So, we need to either go back and start whittling back out [capital improvement projects] or we’re going to have to bite the bullet and make some tough decisions.”

When Wilmington residents approved the $44-million transportation bond referendum eight years ago, the city promised to follow through on projects such as the cross-city multi-use trail, Masonboro Loop Trail, streetscape improvements for Carolina Beach Road and new sidewalks along Oleander Drive, among others already completed. Mortell said project costs have nearly doubled.

The city taps into its fund balance at times as an alternative source and will take on debt as needed for capital improvement plans. It also retains a healthy fund balance 30% above general operating expenses to ensure money is on hand for emergencies, such as damage from hurricanes. The fund balance covers operating expenses until property taxes are collected at the beginning of each year too.

Based on Mortell’s presentations to council this week, the city is in a financial position to theoretically pay for the $13 million in capital projects out of its fund balance and still retain between the 20% and 30% threshold it requires. While 30% is recommended, Mortell explained a minimum of 20% is still good.

“When we get ready to fund projects, we look at available funding, capital balances and look at projects to see which we can issue debt for,” Mortell said. “A drastic drop in our fund balance could hurt us in our bond rating. LGC will ask why you have a drastic drop and what your plan is to build it back up.”

The Local Government Commission is an entity within the state treasurer’s office that oversees local governments’ finances and ultimately has a say on how much debt the city can incur.

“I believe that taxes get a bad rap,” Spears said. “I think it’s our responsibility to articulate to citizens what we’re doing with this money. It sounds like the norm for us, but citizens would much rather a tax increase and see some tangibles and see the things we say we’re going to do. If I found your hand in my pocket, I’d like to know why it was there and then see the cause of it being there.”

Unsatisfied, Waddell also said he was still not comfortable keeping a 25% stipend raise for council members within the current budget, if taxes were to increase at the rate proposed. He has been vocal about it at past meetings. A three-year plan is in place to boost the elected officials’ stipends by 61% by 2024. This year’s proposed 25% increase would take council’s earnings from $11,592 to $14,490. 

A motion to pause the extra funds for council members failed, as the officials did not want to put off long-awaited raises. 

Waddell and Anderson made another attempt to motion for using the unassigned fund balance money to lower the proposed tax rate, but it failed 5-2.


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