News

City poised to adopt tax rate 7 cents over revenue neutral

City Manager John Connet and council member Jerry Smith discuss the city’s $55.7 million budget while council member Jennifer Hensley checks the numbers.

By Bill Moss, Published: May 11, 2023

The city of Hendersonville has a new police headquarters and new public works building. A new fire station and city park are under construction.

Adding 12 new firefighters in 2020 helped the department achieve the highest insurance rating possible. And the city will add new police cruisers, fire trucks and public works vehicles, plus 15 new employees across all of its departments in the fiscal year starting July 1. The improvements, capital borrowing and increase in payroll come at a price.

When their four-hour budget retreat came to a close on Friday afternoon, City Council members all but signed off on a new $55.7 million city budget that would be funded by a tax rate of 49 cents per $100 valuation — 7 cents higher than the revenue neutral rate under the countywide revaluation. The quadrennial reassessment of real property boosted property values by 48 percent countywide and 39 percent in the city, and under state law, taxing jurisdictions are required to report to taxpayers the revenue neutral number — “the tax rate that would produce the same levy as the prior year, adjusted for annual growth in the tax base,” as the UNC School of Government describes it.

The tax increase this year comes after the city raised the tax rate by 3 cents two years ago to cover major capital projects, new personnel and across-the-board pay increases that averaged 13 percent. At the time, city administrators told the council that they would recommend another 3-cent increase for 2022-23 budget and one more penny for the upcoming fiscal year. Sales tax revenue that came in much higher than projected and the city’s $4.5 million American Rescue Plan windfall helped the city avoid a tax increase last year.

“We put our plan together three years ago as it relates to strengthening our public safety departments, hiring a number of firefighters, also increasing salaries for all of our staff as well, starting the fire station and (adding) equipment and also minigolf” at Edwards Park, City Manager John Connet said. “The 7 cents was allocated on the plan. We had a five-year plan. We told the council at the time we would need this 20 percent increase and I think that is what is coming to fruition now. We’ve been able to stave off increases, but now we’re at the place where we’re having to pay for it.”

The city’s two special tax districts, Main Street and Seventh Avenue, have a combined budget of $574,000 and a tax rate of 21 cents per $100 valuation, the same tax rate for the first time. The new rate is slightly above the revenue neutral rates of 20.3 cents and 19.7 cents respectively.

Budget adds 15 employees

At the 49-cent rate, the property tax on home valued at $223,800 would be $1,097 while the owner of a home valued at $716,500 would owe $3,511. Here are highlights of the $25.9 million general fund budget:

• Payroll and benefits are up $1.5 million, or 11.2 percent, including 6½ new employees — a business system analyst, police officer, a property maintenance crew leader, equipment operator and two maintenance workers and a traffic engineering technician. Citywide, department heads requested 52 positions; the city manager recommended 15, which the council tentatively OK’d. The budget provides a 3 percent cost of living increase, merit pay increases ranging from 1 to 3.5 percent and a new 2 percent 401k match. That’s ratcheted down from a 5 percent COLA Connet recommended, a council call that also shaved the proposed tax rate by a penny.
• A three-year federal SAFER grant (Staffing for Adequate Fire and Emergency Response) expired in March, leaving the city to cover the $581,000 cost per year for 12 firefighters it added in 2020. Expanding the fire corps helped the city win an ISO Class 1 fire protection rating, a quality endorsement that city leaders said should reduce fire insurance premiums for homeowners and businesses.
• The budget finances $1.3 million worth of vehicles and equipment in the general fund, including seven police cruisers ($403,000), two fire department vehicles plus SCBAs (self-contained breathing apparatus) ($430,000) and six public works vehicles including a tractor and a dump truck ($469,000).
• Debt service, currently at $2.3 million annually — repaying loans for the new police station, public works maintenance facility, Fire Station 2, two fire engines and other vehicles and equipment — rises by $1.27 million to cover capital borrowing for the new Fire Station 1, Edwards Park and new mini-golf course, a fire engine and ladder truck and new replacement vehicles and equipment.

Here are two more interesting tidbits from the budget workshop:

• Compared with most county seats, Hendersonville has fewer taxpayers to fund its budget. The city’s population is 13 percent of the total Henderson County population — well below the average for county seats across the state of 36 percent. Connet and council members often point out that the city “punches above its weight” by serving residents countywide and tourists by providing city streets, water and sewer service, police and fire protection, Main Street and Seventh Avenue programs and parks and recreation and supporting banking and commerce, entertainment, retail and dining and other business.
• The city has $309 million worth of tax-exempt property, or 14 percent of the total valuation. If taxed, the property would generate $1.5 million in revenue, the equivalent of 5.3 cents on the tax rate.

Enterprise funds

Departments supported by enterprise funds — providing services paid for by user fees — also are imposing fee increases. Here are highlights for those:

• The $24.3 million water & sewer budget raises water rates by 11-12 percent and adds 6½ employees, including a business system analysis, two customer service reps, a utilities engineer and a three-person line maintenance crew. The city and outside-city rate differential continues to shrink as the council continues its commitment to equalize water rates by 2030. The outside rate drops from 135 percent to 130 percent of the inside-city rate.
• The $1.9 million environmental services budget raises garbage collection fees by $3 a month — from $20 and $22 (for 32- and 96-gallon containers) to $23 and $25. That fee supports a budget of $1.8 million, up 18.5 percent, that includes purchase of a small trash truck ($75,000), a $125,000 leaf machine and a $300,000 garbage truck.
• The monthly stormwater fee goes from $5 to $6 to support the $1.5 million budget.
• A new enterprise fund, the Parking Service Fund, has a budget of $1.million. Paid downtown parking and new parking deck generated $127,000 in their first two months. Debt service on the parking deck and land and parking kiosks is $812,200.

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The Hendersonville City Council will hold a public hearing on the budget at 5:45 p.m. Thursday, June 1. It can adopt the budget at that meeting or at its mid-month meeting; by state law it must adopt it before July 1.