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Winston-Salem may have to wait for a streetcar system.
City leaders are getting cold feet about putting a $100 million bond issue on the November election ballot as they anticipate consecutive tax increases just to cover basic services such as keeping police officers employed.
The council had contemplated a modest tax increase of about 1 cent to cover debt service on the bond, which would was expected to include funding for a streetcar system.
Budget challenges faced by the city include an anticipated 11-percent decrease to the property tax base with revaluation next year, the loss of federal stimulus dollars for police salaries, increased fuel costs and plans for the city to kick in more for employee salaries and healthcare benefits.
For all of these reasons, City Manager Lee Garrity told the city council’s finance committee Monday evening that he is recommending that there be no bond referendum this year.
“The latest numbers for the first quarter of this calendar year are very concerning,” he said. “Sales of houses are up, as you may have read, but the price versus assessed value is down. A house in Forsyth County right now on average is selling for 11 percent below tax value. What that means for us going into the year after next with the budget is pretty significant.”
Garrity said the city has learned that Reynolds American has finished closing its Whitaker Park plant, resulting in millions of dollars of equipment and machinery being transferred either to Tobaccoville in Forsyth County or to locations overseas.
“That’s almost a million-dollar revenue hit for next year,” he said.
The city projects a $10.5 million budget gap for the next fiscal year, and a $17.1 million gap in fiscal year 2013-2014, including an $8 million loss from the revaluation. Staff recommends that council spread the pain over the two years by levying consecutive tax increases of 5 cents and 4.75 cents respectively.
The 4.75-cent tax increase would maintain revenue neutrality from the standpoint of the city.
“I think we need to explain that even though the tax rate may increase, the value of your underlying property has gone down, so you would not be paying more property taxes,” said Councilwoman Wanda Merschel, who represents the Northwest Ward.
Garrity cautioned against assuming that a revenue-neutral tax increase would be painless to city residents.
“The commercial part of the real estate base is probably going down more than the residential, so shopping centers — all those type of properties,” he said. “So that will cause more of a transition of the tax burden from the commercial base to the residential base. Many residents… will see a tax increase.”
Among the cost-savings ideas floated by staff are phasing out police officer positions, eliminating commercial garbage collection, reviewing recreational centers that are underused, instituting a hiring freeze and excluding new police hires from the city’s local retirement plan.
“There are ways we can responsibly cut the size of the [tax] increase and we should,” said Councilman Dan Besse, who represents the Southwest Ward, after the meeting. “Unfortunately, I don’t think we can avoid some increase without making irresponsible cuts to public safety and services. I think it would be irresponsible to lay off 33 police officers.”
Council had planned to hold a workshop to discuss a wish list of projects that could be funded through the floated $100 million bond package.
“I’m suggesting that it might be prudent not to have that meeting,” Garrity said.
Besse said if the council decides against putting the bond package on the ballot this year, it should be resigned to wait until 2016 because the tax increases presented to taxpayers this year and next are likely to sour them on a new bond.
“In the off-year elections we have a smaller turnout of the electorate,” Besse said. “On average, they are going to be more impacted by local factors in terms of their thinking than in a presidential election year. The presidential election will give us the broadest audience for the argument for the investment that the bonds will represent. If we determine that we can’t forward to the voters the investment package this year, then I think we should plan on having to wait until 2016.”
Besse indicated after the meeting that he hasn’t given up on the possibility of financing a streetcar system through a bond referendum this year, stating that council members have yet to come to a decision. He said the streetcar system would spur investment and increase the city’s tax base.
“We get a big, new economic benefit from a streetcar system that we don’t get from anything else we’re talking about,” he said. “This is a tough set of years to talk about a discretionary public investment even when the long-term return would be enormous.”