Town Manager Calls for 6.6-Cent Tax Hike

The Chapel Hill Town Council is considering a 6.6-cent property tax increase that town officials have said could help alleviate the town's worst budget crisis in 10 years.

The town also is considering halting pay increases to town employees and some capital improvement projects to plug a projected $2.9 million budget shortfall. The town plans to finalize a budget before July 1.

Town Manager Cal Horton presented his recommended budget for 2002-03 to the council Monday night. The proposal calls for an increase in property taxes of 6.6 cents per $100 of assessed value.

Jim Baker, the town's budget and finance director, said the revenue that would be raised from the property tax increase is nearly equal to the amount the state is looking to withhold from the town to ease its $900 million budget shortfall.

Earlier this year, the state predicted withholding $1.4 million, which Baker said means the town expects to come in about $2.9 million short in revenue when that withholding is compounded with other shortfalls.

The situation is further complicated because Chapel Hill experienced a 2.3-cent decrease in its general fund tax rate during the 2001-02 fiscal year.

But for the 2002-03 fiscal year, officials are projecting a need to increase the general fund rate, of which the property tax is a component, by 6.6 cents to 52.7 cents. The potential increase brings with it the elimination of pay raises for employees, but officials say a pay freeze is necessary.

"Obviously we regret that we aren't able to include pay raises for employees, but that was done in order to hold the tax rate to the 6.6-cent total increase," he said.

In earlier discussions, the original projected tax increase reached as high as 8 cents to 10 cents, Baker said.

Bill Stockard, assistant to the town manager, said that by eliminating pay increases, the town will be able to keep the property tax rate from ballooning at an even more disproportionate rate.

"There's the possibility of no pay increases in the real near future, so that's never a good thing for employees to have to cope with," he said. "But at the same time, I think everybody understands what's going on."

But local officials say they aren't excited about the dollar crunch. "I think it's going to be hard for the Town Council to accept that much of a tax increase," said council member Jim Ward. "But I know the manager has worked very hard to strip the budget down to an amount that will not lay off town employees."

Ward said the council needs to take its time before making any final decisions. "At least as time goes on, the budget picture clarifies and you have a greater certainty as to what the budget outlook is."

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