BERLIN – Elected officials agreed to cut a proposed property tax increase to 18% following weeks of public outcry.
In a budget work session Monday, members of the Berlin Town Council agreed conceptually to an 18% increase—which would make the rate $.80 per $100 of assessed value — this year to be followed by a to-be-determined increase next year. They also agreed to raise water rates 5% and sewer rates 25% to ensure the enterprise funds don’t need to borrow from the general fund.
“Let it be known the Town of Berlin is not considering a 30% tax increase for the coming year,” Councilman Dean Burrell said.
At a well-attended special work session Monday, officials quickly agreed to rate increases of 5% and 25% for water and sewer. Though they initially discussed a sewer increase spread over five years, staff said Monday the immediate increase would eliminate any shortfalls in the fund and would provide the town with time to study rates further going forward.
“This is just stopping the bleeding,” Finance Director Natalie Saleh said.
Councilman Troy Purnell said the whole sewer rate structure was flawed, as new development was subsidizing the town’s wastewater department. Mayor Gee Williams agreed.
“The premise is flawed that we were advised to do many years ago,” he said, adding that the town would be moving forward with a new rate study.
As far as property tax rates, the council Monday reviewed a handful of possible scenarios. They looked at what the mayor’s proposed 30% increase would mean for the town as well as other possibilities—a phased-in increase of 20% this year and 7% next year, a phased-in increase of 15% this year and 7% next year, and a simple 7% increase. According to the figures provided by town staff, the 15% increase and the 7% increase would leave the town with shortfalls in the coming year.
Councilman Zack Tyndall asked if the town could use its casino revenues to cover that gap.
Saleh explained that those funds where required to be used for public safety and were in fact being used to pay back the general fund for the money spent to build the town’s new police station.
“The only option you have is repaying the commitment of the police department,” she said.
Tyndall said he was concerned that the town was changing too many fees at once. He suggested just focusing on water and sewer rate increases and addressing general fund shortfalls with budget cuts.
“I think we can make this (shortfall) up,” he said.
Tyndall also suggested acknowledging that the tax decrease officials approved in 2012 was a mistake and said the town could bring taxes back to $.73.
“Lowering the tax rate was prudent at the time,” Purnell said. “We had a lot of cash in the bank . All of the sudden the wastewater fund started sucking us dry. That’s what’s got to be fixed in my mind.”
He pointed out that the budget the town was currently considering had very little capital spending proposed even though there was sure to be some in the coming year.
“We’ve got to fix stuff when it breaks,” he said. “The last person that wants to raise any taxes is me but we’ve got to right the ship.”
Burrell agreed but said the public had spoken out against a 30% tax increase.
“After all we work for the people,” he said. “The folks are telling us a 30% increase is not the way to go.”
Burrell also expressed interest in returning the tax rate to $.73, which would be a 7% increase.
Saleh said that would leave the town with a $140,000 shortfall. She said it would take a 15% increase—which would mean a rate of $.78—to break even.
Burrell said that if the town wanted to eliminate the $140,000 shortfall, staff would likely need to be cut.
Tyndall said he thought the shortfall could be addressed through the elimination of fringe benefits. He said he’d identified $90,000 in potential cuts and suggested eliminating BJ’s and Sam’s Club memberships as well as cell phone allowances.
His peers offered no objection to cutting BJ’s memberships but spoke against cutting cell phone allowances. The maximum cell phone reimbursement an employee can receive is $50 a month.
“I’d hate to see that cut,” Burrell said. “When stuff breaks it’s staff we contact.”
Saleh pointed out that even if substantial cuts were made to the proposed budget, the town still had to consider next year’s spending. She said changes to minimum wage meant that costs would be going up, as vendors the town dealt with would be increasing their fees. She said even if cuts could be made this year, next year the town would have to look at salaries.
“There’s no easy decision,” Williams said.
When Burrell asked if anyone on the dais supported a 30% increase, they indicated they did not.
“I think we could have as many suggestions up here as there are people so we have to agree on something,” he said.
Williams, who proposed the 30% increase, said the town had started budget discussions early but still needed to come to a decision on a tax rate.
“But it’s not going to be 30%,” Burrell said.
“Of course not,” Williams replied. “You have to propose something. You can’t say what if what if what if….I’ll take all the heat I need to take to get this process accomplished but I can’t be myself—the mayor—and you. You guys have got to decide what it is you want to pass. You’re the ones that have to vote on it.”
Purnell asked John Stern of PKS, the town’s auditing firm, if he had any advice.
“The sewer fund is an albatross,” Stern said. “You really need a study done.”
He said it was also important for officials not to confuse the town’s reserves with cash.
“You have to have spendable money in case of a crisis,” he said.
He added that the town hadn’t increased taxes in 12 years.
“That’s kind of unforgivable I hate to tell you,” he said, adding that there were always going to be outside mandates—such as minimum wage—that would affect town finances.
When council members asked what the town’s tax level would be if officials had raised taxes incrementally over the years, Saleh said it would be $.92.
“I apologize for not raising taxes more,” Williams said. “But now we are where we are.”
Stern said he recommended the town go with a 30% increase or phased-in increases of 20% and 7%.
“That’s a minimum to get you moving,” he said.
Purnell and Councilman Elroy Brittingham said they supported the phased-in increase. Tyndall said he wanted a 7% increase, which would bring the town’s tax rate back to $.73, while Burrell said he wanted a 10% increase. Williams said that Councilman Thom Gulyas, who was absent following his brother’s death, would support the minimum increase the town could live with.
Resident Jim Meckley told officials they should consider larger utility rate increases and less of a tax increase.
“We’re all right now scared to death of a 30% raise in property taxes on top of the sewer and the water,” he said.
Williams said that possibility had already been eliminated.
“Not one person has said we should raise the rate to $.88,” he said.
Meckley said officials had asked for input but it seemed as if Williams’ mind was made up.
“No,” the mayor said. “I’m telling you I am damn tired of people telling me what I think… I had to put out the word of what our situation is financially. We have tried to come up with the best possible solution we can.”
Tyndall asked to see a draft of the budget with cell phone reimbursements and Sam’s Club/BJ’s memberships removed in addition to his own travel expenses.
“Out of town travel for myself will be covered by me,” he said.
Williams said travel expenses for all elected officials had already been cut from the budget.
“You are trying to make some sort of sacrifice…when we’ve already made that cut,” Williams said.
Saleh reminded officials to think a year or two into the future. She said removing expenses like BJ’s memberships would have a minimal effect, as the primary challenges facing the budget would be the increased cost of services.
As officials tried to reach a consensus on a tax rate, Burrell suggested a compromise—an 18% increase this year paired with a raise next year that could be determined during next year’s budget process. According to staff, an 18% increase would equate to an additional $240 for a $200,000 home.
Tyndall continued to express concern regarding a tax hike.
“I’m stuck because I don’t think we’ve really changed anything on the expense side,” he said.
The meeting ended however with the majority of the council supportive of a tax rate of $.80 — an 18% increase — and agreement that the next year’s increase was to be determined then. The proposed tax rate is expected to be approved at the council’s May 13 meeting following a public hearing.