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Tuesday, October 18, 2011

Good Government isn't about the Property Tax Rate Folks!!!

We constantly hear this notion pushed forth by local officials that they have done us a favor by maintaining the Property Tax Rate. Within Catawba County that tax rate will be 53 cents per $100 of property value for the upcoming 2011-12 fiscal year, which is down from the 53.5 cents/$100 this fiscal year. In Hickory, the property tax rate will remain at 50 cents/$100 for the 17th straight year. In Conover, the property tax rate will remain at 40 cents/$100. In Newton, the property tax rate for the upcoming year will remain at 48 cents/$100 valuation.

What I have spoken of before and what my colleagues push forth in trying to bring the public to understanding is that the property tax rate doesn't tell the whole story. Yet, we have local officials that look at that rate as the local third rail of politics, just as we see with discussions about Social Security on the National Level. Local elected officials seem to believe that raising the property tax rate is a death sentence that will render them unelectable and City and County Managers seem to think that an increase in the rate will ultimately cost them their jobs. And on the other end, when they keep the rate at the same level, they seem to be pushing a notion that the maintenance of "The Rate" is the be all, end all of fiscal restraint and prosperity. Look at the City of Hickory where they may as well place it on a flag as a motto, "The City of Hickory has maintained the same Property rate for Umpteen Years."

I know what I am proposing is blasphemy to the Good Ole Boys who run the show around here and their Flock of Seagulls, but if you critically look at the numbers, then you will realize that "The Rate" really needs to be placed in a proper context. Let me ask, When one looks at the specific issue of property taxes and critically thinks about the issues that I have put forth above, then one realizes that the tax rate is the least of our problems. I doubt anyone who has owned a home could say that they aren't paying a lot more property tax now than they were 17 years ago. If "The Rate" is the Holy Sacrament of Taxes, then how could that be? Real Estate values escalated during the Real Estate bubble and the local governmental entities reassessed the value of your home over that time up and up and up and now they are reluctant to deflate those values to truly reflect the current resell level. They are reluctant to do this because so many people are basically financially illiterate and the local governments have fostered and taken advantage of that financial illiteracy through political hyperbole.

Once again let's get back to the bottom line. That's what local officials tell you they are all about. Mayor Wright, here in Hickory, constantly points to the fact that the John Locke Foundation rankings show that Hickory has tumbled to No. 15 in local tax burden ranking, which is seven spots below its No. 8 ranking in 2008, the largest drop of any city in North Carolina's largest population group. The list ranks 34 municipalities with at least 25,000 residents. At the beginning of the millennium, Hickory ranked 3rd in tax burden in 2000 and 2nd in 2001. So it appears that we are headed in the right direction when one looks at the taxes and fees. But, let's look at the cities who were ranked as one through five;; Charlotte, Chapel Hill, Asheville, Mooresville, and Wilmington topped the rankings of combined city and county costs per person. When one looks at the Economic Output and rankings of economic success, those five communities are frequently brought to attention by national studies and publications.

Can you see that those John Locke rankings show just one aspect of the economic dynamics of a community. They show the static cost of government per individual within specific municipalities in the State of North Carolina. This doesn't show the Standard of Living or the Cost of Living of those specific communities. And this definitely does not reflect an individual's Economic Opportunity within those communities either.

You see folks, it isn't all about cutting taxes. It is all about management. The money is not the Government's money. It is the people's money. It needs to be managed in the interests of the people of the community. We have so many local government officials that obsess about the unfunded balance in their communities that they aren't only cutting the fat, they have gotten to the point that they are basically cutting into the bone. Yes, there most definitely needs to be a rainy day fund, but when there is a surplus, then that means that the people of that community are being overtaxed. If there is a surplus, then in my opinion, it is OK to use it towards dynamic investment that can lay a foundation towards the creation of jobs or improving the community's quality of life. Letting that Unfunded Balance sit and rot at 2% interest, while the Nation is facing 10% inflation is not a savvy economic move. It means that that money is losing its value.

The final issue that I would like to summarize is the need to bring integrity back to the property tax system. Yes, local governments need monies to run governmental functions. Yes, we can argue all day long about what that entails,. But, the biggest issue is being square with the citizens. That is where the issue of Revenue Neutrality comes to the picture. We need to see a frank discussion with the public. The public needs to be told that the assessed value of their home is going to be reduced, but the Tax rate is going to rise so that the current level of governmental services can be maintained.

I don't necessarily agree with Catawba County Government's Real Estate Assessments and they are in charge of the assessments utilized by everyone in this County. I believe that they have seen such a drastic reduction in Commercial and Industrial Property viability and value, along with the loss of assessed equipment in those structures, that they have felt forced to maintain the burden on residential property owners. Residential Property values increased by 3%, while Commercial Property values fell by 3% and Industrial property values fell by 5%. The State mandates that revaluations are to be as close to 100% of market value as possible and Catawba County met this criteria. This is factored by a random sample of actual real estate sales that took place during the previous year at what is considered "Fair Market Value." But "Fair Market Value" does not take into account foreclosed properties sold by Banks at cut rate prices. We see a lot of this going on and in the end Residential Property Owners are having to compete with these properties when/if they attempt to sell their home. This honestly needs to be looked at and reevaluated by the NC General Assembly. Leaving the Banks in charge of the Hen House allows these home values to be overvalued.

I do appreciate that the County Manager and the County Commissioners have reduced the property rate to 53 cents to maintain Revenue Neutrality at the same time that they have aimed to make their budget more efficient . We have not seen the same from the local municipalities, who did not lower their tax rate to lower the burden. When we look at the City of Hickory, we also see that they are going to see a surplus in their budget, which will be used to increase the unfunded balance again and there is no stated purpose for what that excess capital is there for. If they aren't going to use the money, then they need to lower the rate.

I can appreciate local budgets being cautious. It is easy to see that the economy is not growing and local governments do not want to chase revenues that could lead to huge losses. But, we are going to have to spend money to make money. The Conover Station and the Eco-Complex are trend setting investments in these hard times that will pay huge dividends when the progression of those investments fall into place. These investments, in my opinion, will flourish under better economic circumstances. These tax revenues are the people's money. The people should be educated on this process and it should always be a transparent process. We should never hide the cost of government by increasing fees or overvaluing assets in an economic downturn. Level with the people and build trust. Don't underestimate their intelligence. In most cases it isn't that the people aren't intelligent enough to understand. It is that the government officials don't want to break the numbers down into terms that the public can understand. Maybe that is because they don't understand them themselves.


Silence DoGood said...

Why? Why indeed. Let me first say that I don’t think the Mayor should have a vote, except in the event of a tie among board members. He has the power to control the agenda. The only things that go on the agenda is what he decides will go. Ergo, he has decided that Cliff is a troublemaker because he asks too many questions and doesn’t agree with Rudy in public. “...We’ll look at it some more.” Why not just tell the man the truth? “You ask too many questions and don’t agree with me in public. You’ll never sit on that commission as long as I’m Mayor.” What should happen is, Guess, Meisner, Fox, or Patton should wait until Commission nominations appear on the agenda, then make a motion to add Cliff and let someone else second. The Mayor then has no choice but to allow a valid motion to go to a vote. Of course, that wouldn’t bode well for ‘troublemakers’ on the council. The power block that keeps Rudy, vis a vis themselves in power would likewise replace the offending party in the next election cycle. They know it, anyone with eyes knows it, and we now know why those same elected officials oppose allowing the individual wards to select their own ward reps within the wards, as opposed to citywide. It nullifies that power block.

I agree Thom. We share different political affiliations, but have the same goals in mind. Life is about journeys, politics is about getting things accomplished for the betterment of life and all the people, or it should be.

I’m thinking that Hickory needs to surrender their flag and change to a Roman standard. Think of it. They’re both city/states, in the Greco-Roman tradition. They both pay lip service to the people through an ‘elected’ body. All we need is a Coliseum and some Lions, we’re all stocked up on Christians. (Sorry Cliff)

Instead of bearing the letters SPQR, it could read SPQH! For the Glory of Hickory, Hail Ceasar!

James Thomas Shell said...

I think this is in response to the Cliff Moone situation. Isn't it?

In Hickory, the City Manager decides what goes on the agenda. The Council Members can nominate anyone at any time. They are just too timid to do so. They have chosen to let the Mayor control them. I don't know what the deal is behind thoise dynamics, but if I were sitting on that Council I'd most definitely stand up toi the Mayor when I didn't agree with him. For some reason they just refuse to stand up for anything even when they believe in it. It is part of the Go along to get along governance we see and it is totally not getting anything done, except for the same ole mundane nonsense that has us treading water and getting worn down.

Silence DoGood said...

First off, I’m in the right thread this morning posting. With that startling revelation, here I go. You’re right, it isn’t all about the tax rate, but that is the crowning achievement that is continually highlighted during budget cycles and election season on the local levels. What people don’t realize is, it is also self-serving by more than a few board and commission members.

Break out your calculators or cell phones if you will and play along. Taxes are levied on property in this State at the rate of x cents per for each one hundred dollars of valuation. That means that if you have hypothetically have a house worth $100,000.00 and you divide that by 100, you get your multiplier of 1,000. Now, use the old tax rate of $.535 and multiply that by 1,000. You should have a tax bill for your Catawba County portion of your taxes of $535.00. Now, use the new tax rate and multiply it out. That’s right, if you have real property with a value of $100,000.00 Catawba County just saved you a whole $5.00 on your taxes! I know, $5.00 bucks is a Vinti Mocha Frap or almost a gallon of gas. Or the always popular, “at least gubment ain’t gettin’ my money.” Fine. If you feel good about $5.00 to the point you’re voting for the same people election after election, despite the other ways they take from you, or manipulate the rules to benefit for themselves, you might want to stop reading the swimsuit edition of Sports Illustrated until the ink is worn off the pages and pick up something with a bit more substance and relevance to why you're here reading this.

What I mean by that is this. If you own one home and the property tax rate just dropped by half a cent, you just saved $5.00. That isn’t much in the grand scheme of things, but it is something to crow about to the constituency. However, if you own millions of dollars worth of commercial, industrial, or rental property, you just saved yourself thousands by voting for that rate drop. How many of you had thought about that? Please stop and do. You currently have people sitting on both governing bodies voting on how much money they are going to spend or save on their taxes. And those folks aren’t real big on voting to spend their own money.

I do however disagree in part about zero-based budgeting. The Local Government Commission, known as the LGC requires local governments to keep a certain percentage of the operating budget in fund balance. If you fall below that percentage, you get a warning letter that your tax rate and the requisite revenues are below what they should be to sustain operations and cover contingencies. How do acquire that money to put away as a savings account, if you are spending every revenue source you have without accounting for the future? People freak out over money they see in escrow without understanding its purpose in government. They think government is stealing that money and making money off of it, not unlike a bank. Not really. Those new fire trucks, backhoes, computers, paper, binder clips and all the things it takes to run a business is likewise necessary to run government and allow them to provide service to the public, isn’t free. Likewise, to fund future endeavors, plan for upgrades and replacement of machines and infrastructure, is it not wiser to escrow those funds a little bit along rather than fund future improvements through competitive grants and bonds? I understand the logic behind zero-based budgeting. I understand why it’s desirable and popular. I also understand it can be extremely short sighted. Which is why I disagree in part. It can be a tool to manage budget during fiscally spartan times, but it should not be a matter of routine practice.

James Thomas Shell said...

I agree with the way you carried out the tax rate and I think you are spot on and it is something we have talked about on here before. Major property owners keep the tax rate low by getting their industrial/commercial property assessed at a low value, while also keeping the tax rate low, and at the same time working to keep residential values far above what you could actually sell them for.

Think about this. The fair value game doesn't take into account how long homes sit on the market. It you want to off load a home in a hurry, then you are going to have to be willing to offer a big discount on what the bank is assessing the property for. If it is an investment property, then you can let it sit and rot and wait for the right buyer to come along.

How many of you know people who have had to sit on their homes and rent them out, because they can't find a buyer to sell to that would enable them not to have to take a big hit. Look how many underwater mortgages there are out there. That reflects reality!!! Not the last 190 people who were lucky enough to sell their homes.

Silence DoGood said...

Something I forgot to mention that I meant to, but I was so busy gloating over being in the right thread it slipped past me.

Each time property is re-valued, there is an appeals process to follow if you think the property is valued too highly. If a list is kept of those appeals, I'd like to see it just for the benefit of seeing who, on the elected boards in Catawba County have appealed their tax valuations and how many times they've done so and on what properties they own.

That could prove to be a very enlightening document.