Chapel Hill is looking at a tax increase. Major reasons are the increase in town service costs, transit costs, and the cost to build a $31.4 million Municipal Services Center housing a new police and fire headquarters, and other departments.
Town Manager Roger Stancil’s proposed $111.1 million budget includes a 3-cent per $100 of assessed property value tax rate increase — 1.2 cents for the town’s operating expenses, 1 cent for the transit fund and 0.8 cents for the debt management fund. The biggest expense continues to be making up for the federal cutbacks in supporting our free bus service, and replacing the aging bus fleet. Read more here.
New growth does not pay for itself. From CHALT’s inception we’ve pressed the town to examine costs as well as revenues in assessing the value of approving new development. It’s apparent that Chapel Hill’s approach of incentivizing new growth by lowering zoning standards has not worked out for the taxpayer because in announcing the need for the tax increase, the Budget Director points out that property tax revenue over the last 7 years has increased 1.3% per year on average while the Town’s General Fund expenses have risen 3.7% per year on average for the same period. The new development built during that period was 71% residential, of all forms (town house, apartment, condo, single family, etc), and commercial development (office plus retail) represented 29% and industrial was 0%.
Only retail development produces sales tax revenue, which along with property tax from all development are the main sources of funds for the General Fund. Only post recession exceptional 6% per year growth in sales tax revenue during this period allowed the General Fund to nearly meet expenses. Sales tax growth going forward is forecasted at only 2.4% per year per the NC state economic forecast, so the future is bleak for the General Fund — unless property taxes are raised.
Employee costs represents 75% of all Town expense. The proposed 2018-19 budget provides another 3% on average cost of living salary increase to all Town full time employees — for 7 years in a row. The current proposed tax increase for operating expenses is needed to cover this expense because new development did not bring in enough new tax revenue.