Mayor Keith Gaskin plans to ask the council this month to approve a 2.87-mill increase in the city ad valorem tax rate to help fund debt obligations.
In an advertisement the city placed in The Dispatch that published Wednesday, city administration announced its plans to bump the overall city millage from 51.24 to 54.11 for Fiscal Year 2022, which begins Oct. 1. The legal notice indicated the council will hold a public hearing on the proposed increase at 5 p.m. Sept. 8. The council must approve the millage rate each fiscal year as part of the budgeting process.
Mills are used to determine property taxes. The proposed increase, if passed, would cost property owners $28.70 in new taxes for every $100,000 of assessed property value.
On Thursday, Gaskin and interim Chief Operations Officer Mark Alexander Jr. told The Dispatch the city was preparing a budget based on a mill value — the amount of tax collections one mill will generate — of $195,000. That means the increase would generate $559,650.
None of the tax increase would directly fund city operations, both Gaskin and Alexander said.
Instead, 2.59 mills would be added to service general obligation bonded debt and another .75 mills would be added to service special urban renewal bonds issued in Fiscal Year 2018 to support redeveloping the Burns Bottom neighborhood. A .47-mill reduction in a firefighter disability and relief fund line item, which is set by the state, brings the balance of the mill increase to 2.87.
“This is my first budget,” said Gaskin, who was sworn into office July 1. “We need to be the best stewards possible of taxpayer dollars, but we are working with numbers and debt that I wasn’t here for when they were created. We want to be fully transparent with the public and (we may have to) raise millage to pay back debt responsibly and in a timely fashion.”
Overall, the city will budget more than $1.5 million in general obligation debt service payments for next fiscal year, according to numbers Alexander shared with The Dispatch. Most of those payments will service long-term debt issued for street paving projects, the oldest of which dates back to 2010.
Alexander said if the council avoids borrowing more money and the mill value doesn’t drastically drop, adding 2.59 mills now will stabilize debt payments through 2035 without the city having to cut from operations to make them.
At the center of the issue is $6.5 million the city borrowed for street paving in 2020, Alexander said. The council approved issuing the bond but did not raise millage to support the payment. The city paid $149,861 toward that debt this fiscal year and is scheduled to pay another $162,500 next year. In Fiscal Year 2023, those payments jump to more than $591,000 each year for the life of the bond.
“There is no reason to wait (until 2023) to raise millage for that when you can bank it now and have it ready when the (increased) payment comes due,” Alexander said.
Urban Renewal Bonds for the Burns Bottom redevelopment are paid from the general operations fund, Alexander said. In Fiscal Year 2018, the city council added a mill to fund the project — which includes property acquisition and other fees associated with packaging the area near downtown for redevelopment. It planned to add .75 mills over two successive years, for a total of 2.5 mills dedicated specifically to that project.
However, Gaskin said the city never added the last .75 mills.
“For whatever reason, city leadership has done these things in the past, and so we have no choice but to make these decisions now,” Gaskin said.
Gaskin said he wants the city to get out of what he called a cycle of borrowing money for street paving and infrastructure, as it has done several times since 2010. Instead, he is researching how to effectively create a capital improvement plan and fund.
Council members weigh in on tax increase
Ward 2 Councilman Joseph Mickens, speaking with The Dispatch Thursday, said he predicted this potential tax increase back in 2020.
Mickens was the only councilman to vote against the $6.5 million street paving bond, which passed amid an investigation into former Chief Financial Officer Milton Rawle that led to his arrest and conviction for embezzling nearly $290,000 in city funds.
“I told my colleagues on the council and the mayor at the time that we don’t need to take on any more debt,” Mickens said.
Looking at the numbers now, he said, he will likely support the tax increase.
“Right now, I don’t see where I have a choice but to vote for it,” he said.
The two new council members — Ward 3’s Rusty Greene and Ward 6’s Jacqueline DiCicco, both sworn in July 1 — seem open to the idea as well.
DiCicco said she hasn’t had the chance to look at all the details, but she is aware of the need to stabilize debt payments.
“We have to find a way to service this debt,” she said. “I did not want to come into office and raise taxes. It’s not a popular thing to do. But we have to at least consider it.”
Greene, likewise, said he needed more time to study the issue.
“Looking at it on the surface, we have to stabilize the debt,” he said. “I hate to raise taxes, but unfortunately sometimes it has to be done. This may be one of those times.”
Zack Plair is the managing editor for The Dispatch.