Council weighs alternative to property tax hike
By Blake Belden, Staff Writer
Apr 21, 2014, 12:46
COLONIAL HEIGHTS — With a 2 cent real estate tax on the table, several council members are considering alternative measures such as a cigarette tax or spending cuts instead.
City Manager Thomas Mattis presented a budget proposal at a budget work session last week that included a two cent hike in the real estate tax rate to provide additional revenues to fund two new full-time and two new part-time sheriff’s deputies. The positions were added as a result of security enhancements at the new courthouse and less part-time hours allowed through the Affordable Care Act.
Next year’s costs related to this additional staffing exceed $200,000, but Mattis emphasized to the council that the issue of funding these positions is not only present in next fiscal year’s budget, but continues with each year following as well, and therefore an increased tax rate would establish a continuing revenue stream.
Mayor C. Scott Davis demonstrated a disfavor for the property tax increase, proposing rather to investigate the possible benefits of implementing a cigarette tax or to look into spending cuts that can be made in the proposed budget to provide additional funding for staffing.
“Increasing the tax on the real estate property is putting the majority on the backs of the homeowners or the businesses that have decided to come and do business in Colonial Heights. The cigarette tax could [pull revenue from somebody] that gets off the interstate and decides to get gas and pick up a carton of cigarettes because it’s a lot cheaper here than in Massachusetts,” Davis said.
Councilor John Wood said that he was not largely in favor of placing the burden of revenue on the businesses, and, in effect, most likely driving down the sale of cigarettes.
“Usually, the more you tax something, the less of it you get. ... If you can buy cigarettes cheaper in a neighboring community, you’ll buy your cigarettes in a neighboring community, which will result in the loss of revenues. You have the spiraling down of your revenues because you continuously are taxing those revenues at a higher and higher rate,” Wood said, before reiterating the notion that staffing could be added in an incremental manner rather than all at once.
Each penny on the real estate tax rate is estimated to generate $150,000 in annual revenue, which is split between the city and the public school system as a result of a tax-sharing agreement.
However, the revenue from a cigarette tax would not be stipulated in the tax-sharing agreement, and would all be funneled to the city, according to finance director William Johnson.
Councilor W. Joe Green Jr. did not oppose the idea of a cigarette tax, and said that he does not support tax increases as a whole, but favored the property tax increase, estimating that the average household would only have to pay an additional $23 per year.
“The amount of money that we’re talking about per household ... it’s still less than the assessed value a year ago that we were paying. I’m not opposed to ... that small of an increase in order to run a budget that the city manager and staff have already trimmed a significant amount,” Green said.
As far as looking at capital outlay cuts, Davis said that he didn’t think it was the council’s position to choose where to decrease spending, but rather to ask city management to analyze where appropriate expenditures could be minimized.
Using the typical budgets of businesses and households under economic distress as an example, Wood said that his first impression for the city is to spend less and trim the budget.
“If everyone’s taxes are down because their household values are down, then the values of the assets that the citizens have are less. People are not quite as flush or prosperous as they once were, so consequently neither is the city,” Wood said.
Councilor Milton Freeland Jr. asked that a report be made on the city’s existing dump trucks, suggesting that the three new dump trucks proposed in the budget might not be a necessity, and that purchasing only one or two new trucks could open up $100,000-200,000 in the budget.
Citing the city’s previous decision to purchase new fire trucks as an example, councilwoman Diane Yates emphasized that although analyzing the dump trucks and other equipment for potential budget cuts was a good idea, the city must make sure that the current services offered and the safety of the city’s employees and residents are not compromised in doing so.
“To ask [city management] to go back through and try to cut [spending], I think they’ve already done that ... as much as they can. Although I’m not in favor of a [property tax] increase, if that’s what it takes to continue as we have been in the past, then I don’t think we have a choice,” Yates said, also expressing curiosity as to the potential benefits of implementing a cigarette tax.
Likewise, Councilman Kenneth Frenier said that he would rather see the city look into the cigarette tax rather than cutting municipal expenditures which are already “lean” as it is.
Mattis said that the city could do without the new dump trucks in the next fiscal year, but said that the three that are proposed to be replaced are more than 20 years old.
“I don’t consider that savings. ... That’s just cost avoidance. ... We’re going to have to buy that equipment sooner or later,” Mattis said.
Mattis said city management would take the council’s alternative measures to the property tax increase into consideration and create some reports before the next budget work session.
The council will have another budget work session at 6 p.m. on April 29, prior to the public hearing on the budget in the council’s chambers at 7 p.m.