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INDEPENDENCE — Grayson County residents will likely see a 44 percent increase in their real estate taxes next year, a decision that came last Wednesday as supervisors began winding down the budget process.
The board of supervisors welcomed Corbin Stone of Robinson, Farmer, Cox Associates — the firm completing a financial forecast for the county — to its budget work session on May 5.
Stone presented the board with a draft of the county’s financial forecast, which projects Grayson’s fiscal health over the next five years.
While the numbers weren’t surprising — the board had been briefed earlier to expect a recommended tax levy of between 50 and 54 cents — it didn’t make it any easier to accept.
Citing a projected deficit of $5.5 million by year’s end, the board expected a tax increase would be necessary.
Had the county not been forced to borrow money to cover cash flow issues and had it not taken on the debt service associated with building a new school and renovating another, citizens would only face a 2-cent increase on the levy to pull the county out of its hole.
Instead, the county would need a tax rate of 70 cents to draw even at the end of the next budget year.
“If you did everything in Year 1… You would be looking at a tax rate of 70 cents,” Stone told the board. “If you did set a tax rate of 70 cents, the next year you would be able to go down to 40 cents.”
While he was in no way suggesting the county look at that option, Stone explained that the board should instead consider what average real estate tax rate the county needed over the next five years to meet that same goal.
That averaged amount totals 49 cents, he continued.
The county will continue to have a tax anticipation note in 2012 and 2013, but Stone expects the county to be free from that debt in 2014.
A lot of factors could change that, Stone explained, such as if the county were not able to get state literary loans in the future. The traditionally low-interest loans have been removed from the state’s budget for at least the next two years.
Literary loans have an interest rate of 2 percent, Stone said. If those aren't an option in the future, the county will likely have to seek a loan from a bank, which could carry interest rates of 4.5 or 5 percent.
“It’s a big jump,” Stone said.
With the current plan, the county will have established a minor fund balance in 2013, and Stone said a portion of that money could be used to cover some of the extra fees if the literary loans don’t become available.
As the county begins to seek additional funding for Phase I of the school construction project and a $4 million line of credit, Stone said it was imperative that the board not only set its levy high enough to prove they can pay the money back, but also that they approve it early enough to get the paperwork complete and money on the way.
The bank is going to look at the rate the county expects to set.
Stone said he felt comfortable that, if the county set the 49-cent levy — and returned to once-a-year tax collection — it would still remain attractive to banks.
A 49-cent levy may pull the county out of its fiscal troubles in the long run, but it won’t necessarily make things easier in the short term.
County Administrator Jonathan Sweet pointed out how tight the forecast actually was. “This is pretty lean. So lean on the budget that any adjustments to it will impact building a reserve and/or the levy.”
Stone added for an example that if the county changed $1 million in the forecast, it would increase the rate 1-cent each year.
Supervisor Mike Maynard pointed out that a 1-cent increase is $10 a year on a $100,000 piece of property.
Citizens are expressing their concerns about the recent talks of such a large increase.
Chairman Larry Bartlett said he spoke with a respected farmer in the county, and was told that the man's taxes would jump $5,000 if the levy was raised that high.
The farmer explained that it was essentially removing $5,000 of his income and he thought all Grayson employees should see the same percentage of reduction in their pay.
Assistant County Administrator Mitch Smith made note, however, that if county employees had their pay reduced and their taxes went up, they would essentially be hit twice.
Sweet added that trying to arbitrarily reduce all employees by a set percentage was not the way to do things. Some employees may actually be underpaid when compared to industry standards, while others’ pay may be “questionable.”
“Employees took some reduction in fringe benefits when we made adjustments in health care, and they did so willingly,” Sweet said. “That saved the county... over $8,500.”
He continued to say that employees have foregone raises for a period of time and that will continue into the unforeseen future. “The employees have been making contributions to some degree by foregoing things. Any tax increases affects the employee as well.”
Bartlett said the farmer’s other concern was whether all the positions within the county office are necessary and/or if their hours could be cut.
Sweet said that a lot of cross-training is going on within the county and that employees are being trained to help out in other areas as demand arises.
Getting back to what tax rate the supervisors want to set and whether they want to return to once-a-year tax collection, the board looks to make those final decisions in the near future.
“I was adamant against the annual [tax collection], for I saw the benefit of [twice-a-year]… but to accrue a benefit that I did not see when we first went here, we have to go back to the annual. If we go back to the annual, I do not see any additional detriment to the cash flow and collections,” Bartlett said. “I don’t have any reason to object to it.”
The extra benefit Bartlett is talking about is the possibility to eventually switch back to twice-a-year collections, with the first half due in June and the second half due in December.
If supervisors opted to make the change back later on, they would see a one-time infusion of an additional 50 percent of the largest revenue generator into the budget year.
Residents would pay their full tax amount in December, and be required to pay one-half of their next year’s taxes six months later, in June. Because the fiscal year ends June 30, the county would have the opportunity to infuse that extra money into the budget, and still collect twice during the next fiscal year.
Bartlett then added that he supported a tax levy of 49 cents.
“I’m in to make sure we don’t have to raise taxes next year… I’m in for the $0.49,” he said.
No final decisions were made and the board will hold its next regular meeting Thursday night at 6:30.
The board also has scheduled another work session on May 19 and a debriefing session on May 26.