Tax increase

I told you so. Not that I like rubbing anyone’s nose in bad decisions, but going ahead with the library renovation without thinking through what we would have to give up to make it happen was a bad decision you could smell before you stepped in it.

On the last lap of what was a lengthy and exhausting council meeting last night, Town Council members gave their feedback on the budget. After devoting nearly three hours to the CH2020 plan, every one of the council members looked whupped. Those who wore contact lenses, popped them out and put on glasses. Those who wore suit jackets had shrugged them off long before. Those who usually talk a lot kept more or less silent.

And then came the bad news about the budget. Some weeks back, county tax administrator Jenks Crayton told council to prepare for a decrease in property tax revenue when property values were sure to come in lower should the county proceed with the revaluation schedule that would commence a revaluation this year, four years after the real estate market went bust. Chapel Hill taxpayers braced for a tax rate increase but consoled themselves that county residents would be taking on a bit more of the tax burden because property values in Chapel Hill had fallen faster than in the county.

Costs of running our town at the level of services we’ve come to enjoy continued to rise, and town manager Roger Stancil began talking openly of tax rate increases, beginning with a half-cent per $100 of property value to cover transit costs.

When the county decided to put off the property revaluation for a few years, the talk of tax rate increases didn’t get shelved. Now Chapel Hill taxpayers must continue to pay tax on property valuations way higher than they could ever sell their homes for, and still have a tax rate increase.

This is where priority budgeting would be useful, Matt Czajkowski said. If we’ve decided that maintaining a high level of service in our fare-free bus system, then we need to know what lower priorities to cut from to offset the transit increase. But without prioritizing services, we don’t know what that low-service-on-the-totem-pole would be.

So let me begin the discussion: Public art should be cut. Stancil is reluctant to touch that department because the bulk of its cost comes from personnel – the arts czar and his assistant – and Stancil has vowed not to layoff town workers. But in an economy of tough budget choices, public art is a luxury we can’t afford. Boom. We’ve saved about $130,000 a year.

What would you cut next?
– Nancy Oates

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  1. N. Fidel

     /  May 22, 2012

    Sacred cows make good eating! The notion that public transportation should be fare-free is foolish. A look at transit statistics shows that there were more than 5 million bus boardings last year. Now imagine charging a $0.25 fare. That would generate more than $1M, which would cover the transportation budget short fall and generates revenue. There is little merit in the argument that charging for bus service will drive down service when the fee is nominal. I would argue that the bus system is a failure if the ridership is unwilling to make a token payment towards its costs.

  2. George C

     /  May 22, 2012

    N. Fidel,
    In case you weren’t aware, UNC-CH students already pay for our bus service through their student activities fee. UNC-CH provides about 58-60% of the costs for CH Transit and Carrboro provides about another 7-8%. CH Transit went fare-free almost a decade ago when the students petitioned to do so and offered to pay a higher student activities fee for the convenience. Unless things have changed, the costs for the buses that are run strictly for UNC’s convenience (such as from UNC’s park & ride lot off 15-501 in Chatham County) are paid for in their entirety by UNC.

  3. Joe

     /  May 22, 2012

    I don’t think we need to cut anything. I’m happy paying more in taxes. I like the public art, and I like the fare free busses. I think it’s disingenuous to expect the town to keep takes flat while everything else in the economy gets more expensive.

  4. Fred Black

     /  May 22, 2012

    Any estimates on what it would cost to collect $0.25 and process/manage the money? Interesting that local dollars ($10.2 mil of the FY2011-12 transit budget) is 58% of the total funding. Of those dollars, 60% comes from UNC, 30% from CH and 10% from Carrboro. [The other 42% of the budget comes from federal (11%) state (19%) and other (12%). All of these outside dollars would not come to us if we had a pay-to-ride syytem.]

    I think we CH citizens get a good deal for the $3+ million from our taxes that goes to transit.

  5. George, you are correct that UNC does pay entirely for service solely related to its operations.

    Further, the students subsidize the system at a little over $7M while the Town does at a little over $3.75M (Carrboro $1.2M). That’s 38% by students, 20% CH and 7% Carrboro. The rest of operational funds comes from shrinking pools of Federal, State and grant monies.

    An interesting “side-effect” of fare free is that our Federal support is tied to ridership. More riders – more support.

    As far as switching over to paid service, CHT says there’s at least a $1M price tag on upgrading buses, central office, etc. (does seem steep!). If paid service reduces ridership then expect a commensurate reduction in Federal support.

    There’s kind of a “game” being played as far as the proposed tax increase.

    The Council decided several years ago to specifically allocate part of our tax rate to paying for CHT. Essentially it’s treated as a separate line item within the budget funded by it’s own slice of the tax rate (analogous to the school special district tax).

    The Town Manager is arguing that the only way to increase funds to CHT is to increase that part of the tax rate. But tax revenues are fungible and, as far as I can tell, nothing is stopping Council from transferring funds from elsewhere in the budget to CHT EXCEPT for the desire to keep everything separate.

    Now, I actually like that CHT’s funding is separated out and treated this way for visibility. Ideally we (the taxpayers) could argue the slice of the pie CHT is getting is sufficient and that the ratio of that slice to the larger tax rate slice should be held constant.

    Of course, I expect most taxpayers don’t care about slices of the rate but their overall burden and probably are unconcerned about how visible the contribution to CHT is.

    In any case, since it’s mainly a matter of keeping the books, the Council could find the funds elsewhere and decide to “grant” the system enough to cover their expenses without increasing taxes.

    Finally, the cost of operating the system have increased dramatically since 2007 mainly because of personnel expenses and fuel increases. Over the same period, we’ve seen a decline in support.

    If you want to see the overall budget and the reason for the request, here’s the most current numbers:

  6. matt czajkowski

     /  May 22, 2012

    Exactly — the debate is not about transit — it is about the overall budget — for which priority budgeting is absent despite all the hype.

  7. WJW

     /  May 22, 2012

    A few suggestions with a few base numbers as I understand them from the FY2011 Chapel Hill actuals.

    CH spends (across ALL funds, not just the General Fund) about $86-$87M in a year. This is up about 48% from FY2005 (in non-inflation adjusted dollars). In FY2005 CH spent about $58M (about $69M at 2011 inflation adjusted [assuming 3% per year] dollars). The population increase since FY2005 has been about 11%. This is just to try and put our current numbers in some perspective.

    The big three of the spending categories, at about a ballpark figure of $20M each, are Public Safety, Transportation, and Environment & Development (per figure 3, page 8 of the FY2011 CH actuals).

    Transportation has about 195 city employees (up from 168 in FY2007). Why are the majority of these folks city employees? What does CH know about running an efficient and cost effective bus service? Why isn’t CH contracting out to a TRANSPORTATION company (I suggest Haliburton) for this taxpayer funded service? Certainly the drivers and mechanics do not need to be city employees.

    There are around 35 city employees doing landscaping. Again, why? There is certainly no shortage of landscaping companies in the area.

    I have looked at the budget, and I can’t for sure tell what the $20M going to “Environment and Development” is being spent on (roads?). There is no department labeled “Environment and Development” on the town website. Maybe that $20M is being spent wisely on high priority absolutely necessary projects. Does anyone know?

  8. DOM

     /  May 22, 2012


    Why not install voluntary “Donations Boxes” on all of buses? Then those that feel guilt for getting a free ride can buy a clear conscience. (I know I’d kick in.)

  9. Road Warrior

     /  May 25, 2012

    I was downtown the other day and noticed something really wrong here. We do nothing for Year Round residents. Almost every business is catered toward students and tourists with very few exceptions.

    There is really no reason for people who sleep here to go Downtown other than restaurants and they don’t really cater to the 3 child Suburban family that our housing model has been built around.

    So 1/2 cent tax increase to pay for buses for people to go to work and school doesn’t bother me. It’s really a blip and a distraction. What does bother me is how little the Town does to create jobs for young adults in High School and people not in college or the College Educated people living in the suburbs.

    We need Carolina North. We need year round business development. We need good Public Transportation. Most importantly, we need to stop catering exclusively to people who don’t live here year round. Let’s encourage some diversity downtown and we can raise our tax base and take full advantage of the people who currently just sleep here and work in Cary, Durham, Morrisville and Raleigh.

    Chapel Hill could be an amazing place. Instead Franklin Street is littered with empty buildings owned by absentee landlords. It makes me sad.

  10. George C

     /  May 25, 2012

    Road warrior,
    Perhaps the Town’s proposed Economic Development Initiative, to be presented at next Wednesday’s Council meeting,
    will be a start to bringing some life to downtown.

  11. Fred Black

     /  May 25, 2012

    I’m betting that there are plenty of downtowns that wish that they had our 90+ percent occupancy rate.

  12. Geoff Green

     /  May 27, 2012

    I’m at Kidzu with my kids while my wife takes a yoga class at Frankiin Street Yoga. Neither activity involves eating at a restaurant.

    Regarding transit ridership, ridership is a highly dependent on fares. Ridership jumped with the advent of fare free. A higher fare reduces ridership, and imposing any fare versus going fare free would have an effect because it slows service, potentially substantially, and adds friction because potential riders need to have their fare to ride. (I for one don’t usually have change in my pocket). That’s on top of the administrative costs. Adding back a fare is doable and certainly worthy of discussion, but it wouldn’t be $1 million of pure extra revenue.

  13. Joe Capowski

     /  May 27, 2012

    Fred I agree. I would add that there are plenty
    of towns that wish that they had what we do, two recession-proof employers that each pay a billion dollar plus payroll within walking distance of our downtown.
    Last Saturday night we went to the stock car races in South Boston, VA. If you have never seen minor-league NASCAR, please try it.
    Coming home about 11pm, we drove through
    South Boston’s central business see how it looked. It looked fine, but was completely deserted, a ghost town. We should count our blessings.

  14. Road Warrior

     /  May 31, 2012

    As a native of VA, I know small Virginia towns well. I used to Referee and also do Cancer Outreach work in the area you are talking about Joe. So, “don’t break your arm patting yourself on the back” as some of those folks are known to say.

    As for the occupancy rate, etc. Awesome. Of course, who occupies changes often. We also have eyesores and vacant buildings by absentee landlords. The bottom line is that we have people who sleep here, pay much more than the combined $6,000 I pay every year, but never spend a penny (beyond groceries) in Town.

    What business or Town can survive that doesn’t at least try to cater to its wealthiest residents.

    Comparing Chapel Hill to South Boston is not very relevant, but I know this because I am from Virginia and know a lot about that part of the state. It’s only real industry is NASCAR and the Prison System.

    As for UNC, let’s not pretend that the State isn’t going to try to strip it. And in a final note of discretionary spending – The Town is sponsoring an event for a Senior Fashion Show at the local mall, but there is a debate over bus service?

    I would pay a full cent increase to help people get to work and fund Public Art, but I don’t see any value in a Senior Fashion Show.

  15. Fred Black

     /  May 31, 2012

    And that, Road Warrior, is why they make Fords, Chevys, Buicks, Hondas, Toyotas, Mazdas and ….