Real estate market woes take a chunk out of Forsyth budget

by Jordan Green

The tail of the real-estate market collapse that inaugurated the Great Recession has swished violently over the Forsyth County budget, wiping out a projected 8.6 percent of the county’s real property value and leaving the county with a $16.8 million budget gap.

Budget Director Rhonda Tatum laid out an unsavory choice for the conservative Republican majority during the county commission’s winter work session last week in the wake of projected figures from the county’s tax revaluation this year. They can raise the tax rate by 9.3 percent — or 6.3 cents per $100 of property valuation – to get to what is considered a “revenue neutral” budget. That move would be anathema to their conservative base despite the fact that the average taxpayer would see no difference in their tax bill. Of course, those who own properties that maintained their value or appreciated would pay more, while those whose properties depreciated more dramatically than the norm would pay less.

The other option would be to chop $16.8 million out of a budget that staff warned is already threadbare.

“We don’t have that in pens, pencils and paper anymore,” Tatum said. She warned against cutting from public health and social services, which are supported by federal and state matching grants.

“You don’t have it there,” she said. “Say you save something in public health — it would affect revenue. So that picture would be worse. And social services, if you say cut positions, you’ve got to cut twice as many positions to get the savings of one. So there is a big impact on what we’re doing there.”

County Manager Dudley Watts said the first place to cut would be nonmandated, non-essential services. The library would be a prime candidate.

“We could cut staffing way down in libraries, we could cut the number of books we’re buying, but then you’ve got a not very good library,” he said. “I think from y’all’s perspective you’d rather just close that branch and make other branches stronger.”

The county had eliminated seven fulltime positions in the library department since 2009, along with 23 in the sheriff’s department and nine in parks and recreation.

Without a rate increase to bring revenue back up to current levels — or cuts in other areas to offset losses — public schools would take a direct hit, according to Tatum’s presentation.

With no rate increase to restore revenue to its current level, the allotment of county funds to Winston-Salem/Forsyth County Schools would fall $6.5 million short of required spending to meet student needs. With a revenue-neutral rate increase, the school budget would run a $1.3 million surplus.

Commissioner Bill Whiteheart, part of the board’s conservative Republican majority, said the situation presents an opportunity to “reassess what public tax dollars are really for” and refocus on core services.

After the meeting, Commissioner Richard Linville, the chairman of the board and another member of the conservative quartet, said Whiteheart’s proposal is worth looking at.

Commissioner Mark Baker, a conservative Republican who was appointed last month to fill the vacancy left when Debra Conrad was elevated to the NC House, said he sees a lot of wisdom in Whiteheart’s suggestion.

“When you boil it down, government has a responsibility to keep citizens safe and protect their freedoms,” he said. “We want to make sure the sheriff’s department and EMS is fully funded, and keep a strong school system. When you get to all of those peripheral things — cultural things — which are nice to have when you’ve got a lot of money coming in — when you don’t have a lot of money coming in, maybe this isn’t the year we can do those things.”

Baker added that he would only want to raise the rate after all opportunities to cut spending have been reviewed.

Linville said that while he wouldn’t be comfortable raising the rate by the full amount needed to reach a revenueneutral budget, he would be open to some combination of a rate increase, service cuts and spending some of the fund balance to close the gap. The Fiscal Year 2013 budget shows a fund balance of $11.9 million, but Linville said any drawdown of those funds would need to be spread over the next four years. Like Baker and Whiteheart, Linville said the last area he would want to cut would be public safety.

“When you talk about adjusting the tax rate and raising the rate up, a lot of people automatically think that’s a tax increase,” he said. “If you’re adjusting the rate to get to revenue neutral, to me that is not a tax increase.”

Commissioner Gloria Whisenhunt, the fourth conservative Republican, suggested Watts look at creating an incentive program to encourage senior employees to retire to reduce payroll costs. She later added, “I think it’s going to require cuts — massive cuts — some things we’ve never done. Any property that we don’t have a future purpose — for instance, a building that we own that we aren’t using — I’d like to look at selling those. That would be one-time money.”

Commissioner Dave Plyler, a moderate Republican, went one better.

“Tanglewood?” he asked, referring to the county park in Clemmons.

A nervous gasp arose in the meeting room, followed by a brief moment of silence and the subject was quickly changed.

Commissioner Walter Marshall, the board’s other Democrat, suggested consolidating four of the county’s high schools. He said Carver High School, Atkins High School, Walkertown High School and Winston-Salem Preparatory Academy — all of which lie within 2.5 miles of each other — hold a combined population of about 1,400 students. He estimated that the county would realize an immediate cost savings of $1 million by consolidating the four schools.

Commissioner Everette Witherspoon, one of the board’s two Democrats, acknowledged that the conservative majority calls the shots, but suggested that revenue be considered as a solution.

“This is a lot of pain, a lot of pain, if we don’t have a tax increase,” he said. “I think it’s time for a modest tax increase.”

Forsyth County has the second lowest tax rate among the five most urbanized counties in the state, with the exception of Wake, whose tax rate is 53.4 cents per $100 of property valuation. Mecklenburg has the highest, at 98.59 cents, while neighboring Guilford’s rate is 78.04 cents. Forsyth has not seen a tax increase since 2007.

Witherspoon, a social worker who operates Chris’ Rehabilitation Service in Greensboro, said the county needs to spend more money on social services. The Forsyth County Department of Social Services has added three full-time and one part-time position since 2009, when the recession strained families and placed additional demands on the agency.

“This is fairly remarkable considering the increase in caseload,” Watts said.

“Our caseload is twice the state average,” Witherspoon said. “The situation in Forsyth County is the social workers have to do more work for less pay. In Guilford County you get more funding, but the caseload is lower.

“There’s a possibility of children being molested if we don’t pick up on it,” he said. “There’s a possibility of children dying if we don’t pick up on it. We’re supposed to be funded at sufficient levels. But we’ve got a conservative philosophy on this board.”

Witherspoon and Marshall both expressed a desire to increase funding for social services, but Republican members of the board remained silent on that point. The commission also received a report on employee compensation, benefits and retention. Human Resources Director John Dean told commissioners that 77.3 percent of employees’ pay is below market reference point. Almost all workers with less than five years on the job are below market reference.

“How are you going to retain good employees without raises?” “Exactly,” Witherspoon agreed. “Good question,” Tatum responded.

“Some good questions have no answers.”

Forsyth County is the only one of the state’s five most urban counties that does not offer a 401(k) match to help employees build retirement funds. The city of Winston-Salem also does not offer a 401(k) match.

Whiteheart dismissed Watts’ concern that the county needs to ensure that it’s compensation structure is competitive to retain talented employees as the economy rebounds.

“I think there’s the slightest possibility that what you’re seeing is the reality of the influence of an economy that’s been failing for some time,” he said. “These statistics I don’t think should be taken personally being specifically indigenous to Forsyth County. What you’re seeing when you look at comparable statistics in private sector and in public sector which is the reaction of the dynamics of the American dollar and the American economy. It is a gloomy picture, I’ll agree to that, but as a private-sector businessman, it is a reality.”

Over the years, the county has become increasingly dependent on revenue from property taxes, even as the base has declined with Forsyth’s shift from an economy dependent on tobacco and textiles to one driven by healthcare.

Tax Director John Burgiss said the portion of revenue collected from property taxes rose from 46 percent in 2000 to 58 percent in 2012. Meanwhile, the percentage of properties subject to exemption claims have risen from 11.9 percent in 2008 to 13.7 percent to 2012.

“A lot of the state laws have not changed necessarily,” Burgiss said. “A lot of the laws are the same as they were. There are more applications for those. Really, there are more instances of nonprofits doing things that private businesses used to do, quite frankly. There’s sort of an expansion there. And as long as the properties meet the qualifications there we don’t have any choice but to approve the applications.”

Watts added, “The new construction — it’s your new hospitals and schools, in addition to churches. When you see a private business go up, you kind of want to celebrate, because it’s taxable.”

Watts alerted commissioners to an impending request for funding by the county’s community college system.

He said Forsyth Tech President Gary Green will likely be coming to the commission to ask for $11.6 million to complete the Career Center through 2/3 bonds. These are bonds that can be issued without a voter referendum to finance capital projects through borrowing a percentage of previous debt that has been retired.