Zebulon facing familiar budget woes

amoody@newsobserver.comMarch 11, 2014 

— Town leaders are entering budget season with an outlook that has become all too familiar in recent years.

“Instead of looking at what we can do, we’ve been looking at what we can do without,” Zebulon Finance Director Bobby Fitts told fellow department heads and the town board at its annual retreat Feb. 25.

The same two issues that have haunted Zebulon in recent years are expected to continue to complicate the town’s finances for several more years, Fitts said. Those are the loss of so-called “hold harmless” funds and an ongoing decline to the town’s overall property tax base.

All signs are that hold harmless – a state reimbursement fund designed to help the more than 100 municipalities that hadn’t financially recovered from the legislature’s 1988 decision to repeal the inventory tax – is a thing of the past. Zebulon anticipated losing about $400,000 (about 5 percent of its budget) last summer, as legislators went back and forth on whether or not to extend the funding in the state’s budget for the current fiscal year.

The General Assembly eventually agreed to fund the revenue stream at 50 percent of previous years, but not before Zebulon was required by law to settle on its own spending plan. As a result, Zebulon raised property taxes 1.25 cents (2.4 percent) to 52.5 cents per $100 of property value.

The full allocation of state funding equals about 5 to 6 cents worth on the tax rate. Fitts said it is too early to tell if the town would try to make up for the full amount with existing funds, or raise taxes by any degree for the upcoming year.

“I think we’ll be carrying the budget draft to the April work session for the first time,” Fitts said. “Looking at it right now, we don’t have any tax increase in there yet, but obviously there could be 15 different changes.

“It’s going to be another tight one. There may be very little capital projects and there will be a lot of very difficult decisions to be made.”

Where the revenue went

The town’s industry-heavy tax base has largely been a good thing for Zebulon, but it’s led to some headaches in recent years. It caused the total tax base to drop more than $62 million from 2012 to 2014, resulting in a loss of about $300,000 in property tax revenue for the town, according to Fitts.

Early projections for the upcoming year show a decrease of about $3 million in the tax base, or $16,000 in revenue for Zebulon, on the commercial end.

“It’s not as bad as the last couple years have been by far,” Fitts said.

The residential tax base is projected to increase by $9 million, or $47,000 for the tow. But initial projections by Wake County show a decrease of $16 million ($84,000 for Zebulon) between vehicle tax and depreciation in public utilities.

The projected decrease of $10 million to the total property tax base would represent a loss of more than $52,000 for the town, equivalent to three-quarters of a cent on the tax rate.

Fitts gave the town board an idea of the financial situation Zebulon would face if substantial growth does not occur in the next few years. Current town policy requires the town to keep at least 50 percent of a year’s operating expenses in savings. He projected the town would fall to that point by the end of fiscal year 2017.

“It means if things continue without significant growth, that’s what will happen,” Fitts said. “That’s worst case. Hopefully it doesn’t come to that.”

Moody: 919-829-4806; Twitter: @easternwakenews

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