RFP Staff
♦ It wasn’t so long ago our City Manager Doug Paris tried to blame Zhone for Fibrant’s devistating run of lengthy outages and then turned around months later and purchased more Zhone equipment. That got a lot of people’s attention. On Friday he tried to blame the N.C. General Assembly for Salisbury’s growing financial disaster and mushrooming taxes, water utility hikes and fees. But gosh–we don’t it see that way. We noticed he had plenty of time to handle sales tax hold harmless funding. We’ll discuss this after we quote Doug’s commentary on the proposed budget:
“This year’s budget will be a challenging one. We are facing two contradictory pressures: the
City’s revenues from the State of North Carolina will significantly decrease this year due to the
General Assembly not continuing sales tax hold harmless funding, while at the same time our
community is requesting additional projects and services for the upcoming year.
Last session at the General Assembly there was a concerted effort in the House of
Representatives to extend the sales tax hold harmless funding for a group of cities that included
Salisbury. Representative Harry Warren, Representative Julia Howard (Mocksville), and
Representative Carl Ford assisted in this effort. The House passed a bill to extend the funding;
however the bill did not have support in the Senate. The Senate decided to end the funding,
and use the funding historically distributed to those cities to help balance the state budget. The
distributions end effective FY 2014-2015.
Our city depended on this revenue stream to provide for General Fund services. The tax rate
proposed for next year includes a 2.45 cent increase to replace this revenue. Without this
replacement revenue we would be required to cut services and reduce staffing in a year that
citizens have requested more services from city government.
This budget includes a total property tax increase of 2.9 cents. If the Senate had passed the
House version of the sales tax hold harmless bill – we would only be proposing a .45 cent
property tax increase this year for the new quality of life projects. The bottom line is that the
Senate’s action to not take up the House version of the bill will hurt us financially. This is no
fault of our staff or our citizens.”
Wait a second. Are we getting a fast one here? It’s common knowledge to anyone reading the Raleigh and Charlotte papers or the stuff coming out of the League of Municipalities that hold harmless funds were cut last year and were extended partially to the 100 cities to help them with their budgets last year and that it would be gone this year–right?
According to a city manager two counties away, Doug certainly should’ve known about hold harmless funds were expiring in 2013 because they were there for 10 years and enacted in 2002. Many municipalities used the hold harmless fund for capital projects and equipment, knowing the money would run out in 10 years while others rolled it into general operations. Those who rolled it into operations were in trouble last year, but the state knowing that many did so, gave a one year extension of 50% or so of what they usually received to help them out. It was known the money was going to be gone last year during budget. So knowing the shortfall was coming, Salisbury should’ve raised the tax rate 1.45 cents last year and not had to raise it 2.9 cents this year.
Salisbury saw this coming. Yet they kept spending the “hold harmless” funds as if there were no tomorrow, on general fund items rather than capital expenditures. In 2002 when the hold-harmless legislation was passed, it had an expiration date.
Here’s an article showing full awareness of the end of hold-harmless revenues appearing in a 2012 NC League of Municipalities alert:
http://www.nclm.org/programs-services/publications/bulletins/2012/Pages/default.aspx?issue=7
Another article from May 2013 regarding the efforts of the city of Zebulon to lobby for an extension of the hold-harmless revenues:
http://www.easternwakenews.com/2013/05/24/2915084/zebulon-lobbies-lawmakers-for.html
Let’s not pass the buck to the N.C. General Assembly especially in the light that you have to collaborate with them and they already take a dim view of what goes on Salisbury’s city government. Without forced annexation to dig into the pockets of her unwilling neighbors, Salisbury must learn the time has come to be held accountable for it’s own spending addictions.
Trouble looms down the road when the city needs to borrow for its next capital project, and faces near-junk-bond interest rates, because they were caught by a major bond-rating firm for playing games with the books. That completely unnecessary Fibrant building on MLK? A capital expense incurred while burning through those certificates of participation. And it sits there, half empty, grass and weeds towering around it as an example of the blight. The Taj Mahal on MLK exemplifies over-extended municipal borrowing without a sound financial plan.
The 2.9 cent tax hike won’t come close to solving Salisbury’s mammoth financial insolvency problems. Moody’s won’t budge until the city’s leadership devises a concrete plan to pay back that $7.9 million they’ve pilfered from the water-sewer fund.
Hard times in Area 51.
