News

City forecasts 7-cent tax increase over three years

By Bill Moss, Published: May 27, 2021

A boost in employee pay and benefits, growing debt service on major capital projects and a dozen new firefighters transitioning to the city payroll from a federal grant are leading to property tax and fee increases for Hendersonville taxpayers.

Striving to maintain top-notch customer service while keeping the employees who carry out those services led the city staff to recommend a 3-cent property tax hike plus water and sewer and garbage bill increase for the fiscal year beginning July 1.

The City Council appears poised to accept the recommendation when it adopts the 2021-22 budget next month.
The property tax and fee increases add up to $189 more a year for the owner of a home valued at $250,000, $218 for a home valued at $350,000, and $377 a home valued at $500,000.
The city has commissioned a pay and classification study to determine what it needs to pay police officers, firefighters, water and sewer workers and other employees to remain competitive.
“Where we were very vulnerable, and I think the council recognizes this, our pay is lower compared to our peers,” City Manager John Connet told council members during a three-hour budget workshop this month. “We are losing employees to folks within the region (and to) the organizations that are very close to us because they are paying more.”
Although the pay study won’t be presented until January, the council agreed that it ought to ratchet up pay across the board starting July 1. If the council adopts the budget as presented, employees would get a 7 percent across-the-board raise plus potential merit increases of 1 to 2½ percent. The city is also increasing the share it pays of dependent care health insurance premiums to 75 percent, up from 50 percent — a $4,000 savings for an employee with a family.
Under the higher pay, the salary for a starting police officer, for instance, would go from $36,913 to $39,497.
“This is an interim step as we see it,” Assistant City Manager Brian Pahle said, “to hopefully get us prepared for what might come in January.” The budget sets aside $790,000 for fiscal year 2021-22 to cover the pay and benefits increases.
“I know we have to do these studies but the study we’ve already done is that we’re losing people,” Council member Jeff Miller said. “I’m glad we’re not going to wait for the study to come in to actually implement the changes that we know we need to make. Nobody wants to raise taxes but this is one of those cases where we have to do it. If we don’t take care of employees there’s no way we can deliver the quality of services that we need to and (ensure that) employees feel respected.”

Tax increases projected for three years

The proposed property tax increase from 48 cents to 51 cents per $100 valuation on July 1 is just the first of three planned increases as the city allocates money for the new firefighters, higher pay based on the study’s recommendation and capital projects. Pahle, a budget specialist who presented the revenue, operating expense and long-term debt details on Friday, said the administration recommends another 3-cent property tax increase next year then a third increase of a penny in fiscal year 2023-24.

Among the projects in the works or on the drawing board are:
• The $11.5 million police headquarters on Ashe Street, currently under construction.
• Fire engine 3, purchased this year for $800,000.
• Seventh Avenue streetscape, $1.5 million, this year.
• Eight marked and one unmarked police vehicles, two fire department vehicles and four public works vehicles, $572,000, this year.
• Renovation at City Hall and the City Operations Center, $3 million, 2023.
• Edwards Park and Dogwood Park development, $1.5 million, 2023.
• New Fire Station 1, $9.5 million, 2023.
• New Fire Engine 1, $800,000, 2023.
• New Fire Ladder 1, $1.5 million, 2025.
• Annual vehicle replacement, ranging from $511,000 to $660,000 a year through 2030.

Tapping the French Broad

The water and sewer department has $110.8 million worth of capital projects in the work over the next five years, including $17.2 million for the new French Broad River intake for backup use.
“I know it’s important to the council and to the county as we expand our ability to be more drought tolerant for our primary water source,” Connet said. “It’s a project we’ve been talking about for about 10 years.”
In the 2007 drought, when the Mills River was flowing at 18 cubic feet per second, the French Broad was flowing at more than 100 cubic feet per second, Utilities Director Lee Smith said.
“It buys us a lot of sustainability during a drought,” he said of the backup supply. “This also gives us another large source for the future as well.”
To help offset debt service and other costs, water bills are going up for customers inside and outside the city. The outside rate is going up $1.10 a month while city customers will pay 73 cents more a month.
“Our water-sewer bill is still about half of what most of our cellphone bills are,” Connet said.
In other highlights:
• The ad valorem tax base held strong and sales tax revenue came in much higher than projected this year — up 16 percent over 2019-20. “When we were talking last year, we were expecting a minus 10 percent in the first quarter, minus seven in the second quarter, minus three in the third and then a plus three in the fourth,” Pahle said. Instead, “it’s been gang-busters for sales tax,” generating a windfall of $765,000. “This is the type of thing which is helping us lessen that tax burden increase and also help pay for our employee benefits and salaries. ... That being said, it’s an elastic revenue source. It can go down just as fast as it goes up.” The city forecasts continued sales tax growth in the new fiscal year, with a gain of $969,000 over the 2020-21 budget.
• The budget adds two police officers, a diversity, equity and inclusion coordinator in human resources, a risk manager, a purchasing administrator, a maintenance worker and a parttime administrative assistant in the fire department.
• In addition to the 7 percent across-the-board increases, the new budget includes merit increases of 1 to 2.5 percent. The city has also raised its retirement contribution to 11.3 percent for civilian employees and 12.1 percent for police officers. “When I started (eight years ago) it was 7.65 percent,” Pahle said.
• The prospective park swap in which the city gives up Berkeley Park for Edwards Park affects the labor forecast slightly. “We’re adding one property maintenance worker,” Connet said. “It puts off the need for two property maintenance workers.” The city will shed some maintenance work at Berkeley Park “but we’re still cutting 25 acres of grass. At the end of the day we’ll be exchanging for property that’s much more visible and with the improvements we want to do it’s probably going to break even.”
Council member Jerry Smith noted that taxpayers will see a substantially higher property tax bill over the next three years.
“You’ve got seven cents up there,” he said. “That’s asking the taxpayers a lot in a short period of time.”
He brought up the idea of tax-exempt nonprofits and churches contributing to the city treasury to offset some costs.
“Would you be willing to pay something and we’ll come up with a number?” he said. “It does seem to me it’s an equity thing. I don’t think it’s asking too much to help the city pay for” services. “To me it’s a fairness argument. I know we’re not going to mandate it but I think some organizations will do it if we ask them.”
Council member Jeff Miller noted that he had gotten excoriated for broaching the subject a few years ago. “There’s a half a billion in nonprofit owned real estate in the city,” he said.
Council member Jennifer Hensley asked about the status of bills in the Legislature allowing cities to impose a quarter-cent sales tax increase. Connet said staff would look into getting Hendersonville added to one of the bills allowing the tax or a tax referendum.
“We’re a growing community,” Connet said. “The service demands are there. We’re watching where we are. We’ve got a plan in place. We’re in very good financial shape, let’s be clear about that.”