Davidson budget proposal only slightly above revenue neutral

Davidson's Board will be presented the staff proposed budget on Tuesday, and according to the agenda item documents it will include a property tax rate slightly above "revenue neutral".

aShortChronicle has previously told readers about the potential for this and what revenue neutral really means to taxpayers.  See here for that previous coverage.  The proposed rate will be 29 cents per $100 in property valuation as opposed to the now official neutral rate of 28.1 cents.  "Neutral" in this case means all things being equal, the Town would bring in the same property tax dollars next year under the new property tax valuations as it did this year under the old valuations.

However, all things aren't equal in this case, so what does this new rate really mean?

Each cent on the tax rate under the new valuations is worth about $261,000 in tax revenue.  At 0.9c above revenue neutral, the Town will bring in $235k more than it would under the neutral rate.  However, that's not the whole story.  Because the neutral rate includes a growth factor and because the town is growing by adding new homes, even under the neutral rate the Town would bring in $319k more in property tax dollars than it did in FY2019.  So, going with the rate above revenue neutral brings in even more revenue than a neutral rate that would have already brought in more revenue.

On top of that, other revenue streams to the Town are growing such as sales taxes, utility franchise taxes, interest revenue and use of the fund balance.  All in all, the Town would have been looking at nearly $500,000 in higher total revenues without resorting to property tax increases above the revenue neutral rate.  That would have allowed for a roughly 4% increase in spending versus the roughly 6% increase in the proposed budget.  Either one would be considered a more than healthy boost to spending, and other than listing new items that weren't included which would have driven spending even higher, there's not a whole lot in the budget docs that shows major efforts at cost cutting.

Now, in fairness this all comes out to not all that much money when looked at on a per household basis, and the Town definitely points that out.  On Page 9 of the presentation document, it shows the  tax impact for a $400,000 house equals $36/year over what the revenue neutral tax would have been.

Would most people prefer to have that $36 for a trip to the Soda Shop, or a couple trips to Whit's or Ben & Jerry's on Main street?  Sure.  However, with this Board still saddled with dealing with a Mi-Connection subsidy of $1 million per year that eats up nearly 8% of the overall budget while also staring at the a big potential pile of money from the revaluation, having a slight increase is not stomach churning or surprising.  The Town is also seeking to offload Mi-Connection, so hopefully there is a real light at the end of that tunnel.  The job market is also as tight as It has ever been, so compensation should adjust.

Here at aShortChronicle the take on this year's budget is it certainly could have been much worse, and likely would have been much worse under the previous Board with the spending plans that group of elected officials had on their agenda.

From that point of view, this year's spending plan can be considered a win by comparison - even with a slight tax increase.