Friday, April 19, 2024

NHC commissioners ask to review half-cent tax cut despite tough budget season ahead

The New Hanover County Commissioners are facing a tough budget season ahead. (Port City Daily/Shea Carver)

NEW HANOVER COUNTY — Commissioners in charge of putting together New Hanover County’s budget held their first budget session Monday, but they’re already fielding calls for more funding.

READ MORE: Board looks at ‘worst case scenario’ budget, tacks $10 million more onto shortfall

The most high-profile pressure is in favor of additional funding to New Hanover County Schools; the district faces a $20-million shortfall after years of relying on ESSER Covid-19 relief funds and its reserves to balance its books. NHCS has not presented its formal budget with any additional funding requests to the commissioners yet. 

This is the first component county staff reviewed at Monday’s meeting. 

The county provides funding to the district based on average daily membership, the same method as the General Assembly. The district pays $3,434 per student and school funding makes up the largest function of the county budget at nearly 31%.

Still, commissioners are increasingly being asked to provide more, as the district faces cuts to staff otherwise. According to the North Carolina Constitution, the state is responsible for providing its residents an education; since the Great Depression, the state has covered salaries while local governments provide funding for capital improvements. 

However, with state funding not keeping up with inflation, nor state-mandated raises, it causes more local dollars to fill in the gap.

“You are putting $140 million in K-12 education, which is a state responsibility,” county manager Chris Coudriet said at the meeting. 

NHC Chief Financial Officer Eric Credle also addressed a rumor that New Hanover County was eighth in wealth, but 83rd in effort among the state’s counties. While those numbers are correct, Credle said the data assumes the county is operating under the state’s average tax rate, when really the county charges its residents less.

Barfield touted the county’s past district funding, noting it was normal to provide around a third of the county’s budget to the schools. Among the 788 county-funded positions in NHCS, nurses, social workers and counselors are the most vulnerable as the district tries to avoid cutting as many teacher positions as possible. Barfield said these positions were just as important.

Around 279 positions — 160 of which are teachers or teacher assistants — will need to be cut in NHCS to balance its budget. This is the worst-case scenario, barring any additional funding from the county or natural attrition of employees as they leave or retire. 

Commissioners did not commit to providing more funding at the Monday meeting. According to staff’s presentation, it may not be possible without making cuts or raising taxes. 

Credle explained the county’s debt service was up $3.7 million, mostly due to construction costs of the new government center and board of elections building. Public safety costs have also increased, measuring $9.5 million over last year’s allocation. These costs are tied to inflation, which Credle said is up 19.5% since the county’s last property revaluation in 2021 and revenues have not matched. The next revaluation is in January 2025.

According to staff, the FY25 revaluation is estimated to bring in an additional $5.2 million in revenue. 

“Next year we’ll sort of catch up, potentially, part of that inflation increase on the revenue side,” Credle said. “It’ll make things a lot easier, but this is going to be a challenging budget season.” 

The commissioners have also been decreasing the property tax rate every year since 2021, when it was $0.555. It is now $.045, but over the last decade has been as high as $.063 in 2017, which was also a revaluation year. 

Similarly to NHCS, the county also has positions expiring with Covid-19 relief funds. Over $6 million of American Rescue Plan funds will sunset at the end of this fiscal year. This will affect 19 mental health employees at NHCS ($2 million) and 10 employees with the Elements youth violence prevention program ($850,000). 

Port City United’s community care coordinators, 15 in total that assist students and families access needed resources, are also funded with $1.46 million in ARP funds. The county’s pandemic operations team, costing $460,000, will also be affected. 

Other affected programs include the film crew internship scholarship, infant and toddler mental health, the Too Good for Violence program expansion, Senior Resource Center congregate meals and after-school transportation.

However, the county has an ARP surplus of $3.2 million, which it recommends using to keep funding the school mental health employees, the Elements program, Too Good for Violence, Senior Resource Center meals and the PCU coordinators. These programs could be funded until the end of the year through the surplus ARP funds, but the county would then need to find the funding from its own sources.

“I think those are things that are adding value to our school system, I don’t think any of us want to see go away,” Barfield said. 

Coudriet said he thinks there are opportunities to scale down some of these programs’ expenses and look for other funding sources, but emphasized staff will take commissioner direction on how many and which programs are moved to the general fund. 

Barfield suggested maybe there was potential for PCU to be funded through the New Hanover County Community Endowment. 

There are also $2.2 million in ARP funds expiring at the end of this year, affecting the joint city-county Getting Home homelessness program, workforce rental housing assistance, job training through Step Up Wilmington, mental health scholarships and community resource coordinators. 

Meanwhile, county staff are projecting only $1.2 million above budget this cycle when accounting for sales tax revenue projections. 

“We’re hoping to get some general guidance from the board, I think most importantly is as a matter of property tax,” Coudriet said. “We are assuming to remain at 45 cents per $100 of value. If that’s not the right expectation, I think the earlier we know that the more helpful it is but what I can say definitively from a staff perspective is there is no expectation that we intend to ask for a tax increase.” 

Commissioner Rob Zapple said he would be interested in seeing what a half-cent tax reduction would look like, which would take $2.5 million out of the current projected revenue. 

Scalise seconded that request. 

“We have an obligation to the community every year to make sure that we’re running as tight and lean of a ship as we can,” Scalise said. “We want to obviously be robust in the services that we’re able to provide the community but we should take a good hard look every time at opportunities that we have to achieve a tax cut if possible.” 

The commissioners are planning on having another budget work session in the coming weeks. It must be approved by July 1.


Reach journalist Brenna Flanagan at brenna@localdailymedia.com.

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