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The Daily Tar Heel

Town May Give Property Taxes Bigger Increase

Fiscal planners are considering an additional increase in property taxes and are hoping to avoid layoffs and cuts into service agencies.

The problem is that "elsewhere" might mean cuts for social service agencies, including nonprofit organizations that benefit low-income residents.

"We always give contributions to human service agencies, and one of the things that is important to me is that we not cut our budget to human service agencies because during economic times is when they need the most attention," said council member Edith Wiggins.

In the past five years, Chapel Hill has allocated an average of $177,480 annually for nonprofit agencies that address human service needs for Chapel Hill residents.

But the groups won't be alone as town officials hustle to come up with the amount necessary to fend off a budget crisis. The town has saved $4.3 million in the event that disasters might strike.

The town's next fiscal year could be made worse if the state opts to withhold money from its municipalities to ease its current $900 million shortfall.

But the town is working to accommodate either scenario, especially with regard to next fiscal year. "We expect that the state is going to withhold funds again next year," said Town Manager Cal Horton. "We expect that it will be a temporary phenomena that will not happen again in the coming years. We will propose a combination of cost reductions and a tax rate increase for the council to consider."

An increase in property taxes is likely, but Horton said an exact figure has not been set and that option is not a definite.

Earlier this year, at a January annual planning session, Horton predicted a 4.7 cent increase would be necessary to buffer the town's already dim fiscal outlook. At that meeting Horton attributed the increase to the national economic downturn.

Current tax rates of 50.4 cents per $100 valuation mean an owner of $200,000 in property pays $1,008 each year to the town. The 4.7 cent increase would boost that bill by $94.

But now that the state is threatening to add to the town's budget stress, Horton said the council will be forced to make a decision regarding the increase in taxes once the staff creates a report.

The council plans to meet with the town staff soon.

Wiggins said adjusting the budget for the next fiscal year is going to be a challenge that she hopes will put some capital projects on hold but most likely won't include layoffs. "The manager has been updating us periodically on the financial situation, and we are awaiting his next budget presentation where he will present his recommendation on how to deal with that," she said. "As the budget picture changes he has to adjust (his recommendations).

"Right now we're just awaiting the specifics."

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