News

Building costs raise choice of sales tax v. property tax

By Bill Moss, Published: January 24, 2016

It would be impossible to avoid a property tax increase to fund more than $100 million in capital projects unless voters OK a quarter-cent local option sales tax, Henderson County officials say.

County Manager Steve Wyatt and County Commissioner Grady Hawkins, while emphasizing the question is up to voters, say that by raising $2½ million a year the sales tax could enable the county to borrow around $30 million.
“Obviously, the elephant looming in the room is the school projects,” Wyatt said in an interview before last week's budget retreat. “You’ve got Hendersonville High School and Edneyville with whatever that pricetag is — $75-80 million just for those two projects. I’m confident there will be discussion because we’re planning on showing debt capacity for the next few years with and without the sales tax.
“With that $2½ million the first year, it’s a significant positive impact. One is you wait. You wait till you’ve paid off enough debt but then you’re looking at construction price escalation. You’ve got to balance that.”
As the county budget rises and the board spends money on capital projects, the county’s fund balance has dropped. The Board of Commissioners has a policy of keeping its rainy day fund at 12 percent of the total budget. If the board revised that to 10 percent it would have more money for debt service, Wyatt noted.
“It gives you some more flexibility,” he said. “But what does it do to your credit rating? You’ve got to weigh your cost of borrowing. We’ve been able to do the things like Sierra (Nevada). We can make that work because we’ve got some cash flow. But if you dip down below 12 percent, the kind of projects we’ve competed for we couldn’t have competed for 8-9 years ago. We didn’t have the cash.”
Commissioners have already signaled their support for the quarter-cent local option sales tax as a way to fund a capital building project of more than $100 million without raising the property tax.
“What it does is it gets some of the pressure off the property taxpayer in the future,” Wyatt said. “It diversifies your options. Right now you’ve got one option — that’s the property taxpayer. This captures folks passing through town. It’s also paid a little bit at a time. You’re talking about a quarter of a cent on the dollar. With that said, let’s be clear: A tax is a tax is a tax. The good part of this is people are going to get decide in the future. There will be a higher property tax in the future unless this quarter cent passes because the county is outgrowing the 51-and-a half-cent tax rate. You’ll see in our budget projections that just to do what we’re doing now is going to take everything we’ve got.”
Hawkins, who has long styled himself a taxpayer watchdog, also said he expected the commissioners to endorse the sales tax. They voted unanimously last month to put the question to voters on Nov. 8.
“The other really big thing that will be a necessity (to consider) is how the voters feel about this quarter cent sales tax,” Hawkins said. “That will probably increase our debt capacity by about $30 million.”
Would he and commissioners actively support the local option sales tax? “Absolutely,” Hawkins said, “and also I think the Board of Education will be a valuable ally on that because if we’re able to pick that up in the long run it will shorten the amount of time we need to complete these projects.”