Discussion suggests levy will go up in years ahead

By Greg Ellison

(April 14, 2022) The Berlin Town Council’s discussion Monday of where to set the property tax rates in the new fiscal year resulted in an airing of concerns by department heads who said their needs are being ignored again.

During first reading for the proposed FY23 tax rate on March 4, the council opted to reschedule its consideration of maintaining the FY22 rate of 81.5 cents per $100 of assessed value until its meeting on April 11.

One resident, Robert Fisher, offered comments during the public hearing portion of the tax rate consideration.

Fisher asked if maintaining the 81.5 cents rate for FY23 would provide sufficient funds to balance the budget without the inclusion of American Rescue Plan Act funds or other grant sources in subsequent years.

“Not to do the things we know need to be done,” Councilman Troy Purnell replied. “We’ve been talking about an incremental [tax] increase forever.”

Fisher questioned budgeting impacts in the future.

“So next year there should be a substantial increase just to catch up?” he said.

Purnell agreed the potential exists for tax rates to jump significantly in FY24.

After council member Jay Knerr introduced a motion to approve the 81.5 cents rate for FY23, Planning Director Dave Engelhart aired a list of concerns.

“I recall three to four years ago when we had this large tax increase, we were told by the previous mayor that employees had to share in the pain,” he said. “We did share in the pain, but we didn’t create the pain.”

Engelhart said the 12-cent increase enacted during the town’s financial crisis at that time was the result of short-sighted planning.

“That was because previous mayors and councils had not raised incrementally the real estate tax rate, which is a planning tool for any municipal body for their future spending,” he said.

Despite the recent receipt of American Rescue Plan Act funds, Engelhart said the grant source would likely be diverted for pending infrastructure issues.

Englehart stressed the need to learn from past mistakes.

“Unless you make a concerted effort to consider a 1.5 or 2.5-  or 3-cent tax rate each year, you’re never going to catch up,” he said.

Engelhart said delaying the inevitable would likely lead to circumstances similar to those suffered in the past.

“If it had been done a penny at a time for the previous 12 years, we wouldn’t be here today having this discussion,” he said. “You have to replace moneys in the town coffers.”

Engelhart asked if the current draft budget accounted for employee pay increases.

“The only items in our budget that we prepared that is not getting funded is our request for 10 percent [raises],” he said.

Mayor Zack Tyndall apologized for sending the draft budget to council members but not to department heads.

“The 10 percent is not there, but there is a value of 5 percent for the general fund for our employees,” he said.

Engelhart asked if a tier increase was being proposed.

Tyndall said a 5 percent increase for staff as a one-time payment is being proposed as a transitional measure.

“That increase is designed to offset what we’re going to work toward, which is a step system,” he said.

Engelhart said regardless of FY24 goals, the FY23 budget fails to factor in employee needs.

“This year’s the year we’re in pain,” he said.

Engelhart also asked why current draft budget figures were not shared with department heads prior to the meeting.

“These numbers these are a surprise to us,” he said. “I don’t think it’s fair treatment of the employee group.”

Tyndall countered that the proposal for employees is generous.

“It’s the value of a 5 percent increase in the general fund, which would be about $130,000,” he said.

As proposed, that sum would be divided among 43 full-time staff and doled out bi-weekly.

“We need to see how the numbers break out,” Engelhart said.

Tyndall said the 5 percent one-time allotment is intended for FY23, with an equitable step-system, developed for FY24.

“We’re not trying to [develop] that system in a month,” he said.

Engelhart said the move would negatively affect the staff.

“Are you thinking that inflation and the cost of living is not going to march on until July of 24 the way it is?” he said. “We are getting hammered and we need some help.”

Tyndall, while noting details on distributing the 5 percent increase would need to be fleshed out, stressed the need to focus on tax rate considerations.

“I would like to hear feedback on how we structure that, but this evening is about a tax rate,” he said.

Finance Director Natalie Saleh said with maintaining the 81.5 cent rate for FY23 the draft budget currently reflects a deficit of $25,000.

Tyndall said the sum would be accounted for without future adjustments.

“We’ve got a pretty solid budget that’s framed up without a huge deficit,” he said.

Purnell countered that assertion.

“But you stripped so many things out of the original proposal that everybody said was a need,” he said.

Purnell asked Saleh if increasing tax rates by three cents would accrue sufficient funds to cover a 10 percent pay raise for staff.

“It would put us closer,” Saleh said.

Purnell noted the importance of following financial guidance provided by Saleh and internal auditors.

“I don’t think we need to be cutting out an incremental tax increase that everybody swore we need to do,” he said. “We’re not listening to the employees.”

After council member Jack Orris seconded Knerr’s motion to retain the 81.5 cents rate, the measure failed by a vote of 3-2 with Purnell, and council members Dean Burrell and Shaneka Nichols opposed.

Purnell made a subsequent motion to increase tax rates to 84.5 cents which died after failing to garner a second.

Saleh reiterated that the discussion was about tax rates, with employee raises still open for future consideration.

“Going forward today, we’re fine because we’ve got a big grant on the table and we can advance funds from reserves that we set aside,” she said.

Still, Saleh said without an incremental tax increase, the town would face budgeting challenges in the future.

“We need to look at least three years down the road to see what we need,” she said.

Knerr, however, was hesitant to raise the rate.

“It’s very real for residents of this town who are already paying more from assessments,” he said.

Knerr again moved to retain the 81.5 cents rate that was passed with only Purnell opposed.

The next budget work session is scheduled for April 18, prior to budget introduction on May 9 and adoption on May 23.