Twin City Taxes

by Jeff Sykes

Winston-Salem budget moves forward despite state’s tax grab

State level tax reform continues to drain Winston- Salem of much needed revenue, forcing city leaders to consider a one cent tax increase in order to prevent the city from falling further behind its competitors in key areas like employee salaries and capital needs. Three council members expressed interest in an even larger tax increase to address community priorities.

Staff members met with a nearly complete City Council last week to discuss the budget in detail at a scheduled meeting of the Finance Committee. Councilman Dan Besse was absent.

City Manager Lee Garrity proposed a one-cent increase in the property tax rate in order to make up for revenue lost due to a state law that took about $2 million from the city.

The bill, passed last year, exempts certain business software from the tax base. The Forsyth County Tax Office estimated that up to $400 million in custom software was removed from Winston-Salem’s tax base of $19.8 billion. The lost tax base is part of a series of hits to the city’s primary source of funding. A property revaluation last year cost the city 10.5 percent of its tax base, resulting in $7 million less in revenue.

Complicating matters in a conservative political climate is a recent market study of the city’s pay system. The study found that actual pay for 80 percent of city employees was below the average pay of the comparison group, which included Greensboro, Durham, Raleigh, Charlotte and 17 other local governments in North Carolina.

The study found that the average pay for a police officer in Winston-Salem ($36,520) was 14 percent lower than the comparison group ($42,510). Firefighters and sanitation workers were seven and nine percent lower, respectively. Much larger gaps exist among maintenance workers (21 percent lower), financial analyst (17 percent), and office assistants (31 percent.) Light equipment operators lagged behind by 37 percent and had a turnover rate of 13 percent.

Garrity is proposing a 1.5 percent market pay adjustment for employees with actual pay below average. This would cost the city $1.3 million, but it would be offset by $1.5 million in savings from retirements and other attrition.

The budget also includes a tiered merit pay raise for employees who receive positive job evaluations. The steps range from 1.5 to 3 percent based on performance and would cost the city about $2.1 million.

Discussion of the budget had just gotten underway when Garrity noted that in addition to the software tax deletion, the General Assembly had just rescinded the business license tax levied by cities. The provision was included in a larger tax bill rushed through the legislature during its short session. The move is expected to cost Winston-Salem an additional $2.5 million next year.

Which puts a damper of city revenues, despite almost two percent growth in local property values. Garrity referenced a Maya Angelou quote about changing how you think about events beyond one’s control.

“We can’t change what the General Assembly just did, but we will have to roll our sleeves up and get innovative,” Garrity said.

The budget reduces overall city employment by five positions. This was achieved primarily with the deletion of eight vacant positions in sanitation. A force reduction there came about after the city bought four automated refuse trucks last year, which allowed a reduction in crew sizes. An additional vacant position in parking was deleted as well.

The move allows the city to add four new positions that increase overall efficiency. Two come in the police department, where additional latent fingerprint examiners are expected to boost clearance rates of burglaries and homicides. An information analysts is proposed for the fire department, while a senior crew coordinator is to be added at the Winston-Salem Fairgrounds. This position is to be paid for with new revenues from events.

In addition to the pay increases for current employees, the budget includes a provision to set the minimum wage for city jobs at $10.10 an hour. Some council members expressed support for what is called “a livable wage” as opposed to the current minimum wage.

“I think $10.10 is a good start,” said James Taylor. “I think we can lead by example and make sure we pay our employees a livable wage. I think it starts with the $10.10 mark and I support it wholeheartedly.”

Councilman Derwin Montgomery agreed, noting that he had been in conversations with people from across the city about addressing poverty issues.

“I don’t think that we as a city can begin that process to begin to tackle poverty in our community, and pulling people together to have a larger conversation, if we as a city are not doing something to set an example,” Montgomery said. “I think that this is a step in the right direction by setting an example as a city government to make sure that individuals who come to work 40 hours a week still don’t qualify for public assistance.”

Following a wide-ranging discussion that covered topics including $50,000 to move SciWorks downtown, moving recycling revenues to the general fund from solid waste, and the new ninecent Business Improvement District tax downtown, council members hinted that an even larger tax increase might be considered.

Molly Leight brought the issue to the table after it was noted that the overall cost to citizens for municipal services was the lowest among the state’s five largest cities, at $1,594. Leight proposed the council consider a tax increase of 1.25 cents.

“It certainly would not make any size house pay that much more in property taxes,” Leight said. “I cringe every time I see our graph about Winston-Salem being the cheapest place in the state.”

Council members Denise Adams and Jeff MacIntosh agreed.

“I don’t think it helps us as much as we think it does,” Adams said. I think we need to look at the bigger picture. If we are going to compete with other cities the size of Winston-Salem in North Carolina then we need to start looking at how we get ahead and do that.”

Adams referred the council to the coming loss of the business license tax in the next budget, a $2.5 million hole the city will start with, which could become deeper if new legislation continues to crimp city revenues.

“There are other things coming and they are built into bills just like these things that nobody really saw until it happened,” Adams said. “I think we need to be more proactive in what we are doing versus waiting on it to happen.”

The Finance Committee held a second budget workshop this week to discuss capital requests and funding to community groups. A public hearing before the Finance Committee is scheduled for Thursday at 7 p.m. in City Hall. Both Finance and Public Safety committees meet June 9 to consider forwarding the budget to council.

A City Council vote on the budget is scheduled for June 16. !