Proposed Orange County budget raises the property tax rate. What’s in it for schools?

A proposed $279.2 million budget would add 3 cents to Orange County’s property tax rate but is cautiously optimistic that life and the local economy will return to normal next year, County Manager Bonnie Hammersley said.

The 2021-22 operating budget includes $92.9 million in local funding for the county’s two school systems, a small increase but roughly $7 million less than the school boards have asked for.

County spending would remain at $4,367 per student. It would be the second time since 2009 that a county manager has not planned a per student spending increase, Hammersley said.

She noted that the proposed operating budget is 1.83% more than this year’s $274.2 million budget, which runs through June 30. It would set the property tax rate at 81.87 cents per $100 in assessed property value, based on the county’s recent revaluation. The owner of a home valued at $350,000 would get a $2,865.45 county property tax bill.

A penny on the tax rate could generate roughly $2.1 million for the county. Property owners in the towns and the Chapel Hill-Carrboro school district pay additional property taxes.

Last year’s budget was drafted “in an environment of trepidation and uncertainty,” Hammersley said. However, an anticipated drop in sales tax revenues last year did not materialize, in part because of increased online sales.

Since some economic sectors will recover faster than others, the proposed budget reinforces the social safety net, she said. It also includes one-time emergency measures to mitigate a tax increase that had been anticipated for several years to cover the county’s $125 million school construction and affordable housing bond debt.

Commissioner Mark Dorosin asked if the county could spread the tax rate increase out over additional years. That is not possible, because the county delayed a 1.67-cent tax-rate increase last year because of the pandemic, Hammersley said.

The budget also relies on a one-time, $3.3 million allocation from the federal American Rescue Plan Act for COVID-19 related expenses. That money will allow the county to delay an additional 1.15-cent tax- rate increase until fiscal year 2022-23. There is a chance the increase won’t be needed, Hammersley added.

“Data is indicating that the recovery will be K-shaped,” she said. “That means that certain sectors of the economy will recover both faster and stronger than other sectors, and because of these differences, renewed economic stability for residents will not be equally distributed.”

The proposed emergency measures in next year’s budget are not sustainable over the long term, she added.

The commissioners will hold a public hearing on the proposed budget May 11 and a public hearing on proposed amendments June 3. The budget could be adopted June 15 and would take effect July 1.

Property tax revaluation

Orange County just completed its 2021 revaluation, which aligns real property values with their market value. The appeals process is happening now.

North Carolina requires all counties to complete a revaluation every eight years; Orange County does it every four years but skipped the 2012 revaluation because of lingering effects from the 2008 recession.

State law also requires counties to reset property tax rates to be “revenue neutral” after a revaluation, so that their tax rates bring in the same amount of money as they did under previous property tax values.

The 2017 revaluation raised Orange County property values by over $1 billion, largely because of new construction. The latest revaluation increased property values by 12.6%, or $2.44 billion, for a total property tax base of $21.74 billion.

The new revenue neutral tax rate would be 78.87 cents per $100 in assessed property value, down from 86.79 cents, Hammersley said. The revenue neutral rate for the Chapel Hill-Carrboro City Schools district tax is now 18.30 cents per $100 in assessed property value, down from 20.18 cents.

Education, school building needs

The Chapel Hill-Carrboro and Orange County school boards had asked for an additional $11 million in funding this year — roughly $100 million — to help students with academic, social and emotional challenges stemming from the COVID-19 pandemic.

The city and county school districts also receive state funding and a smaller amount of federal money, while the district tax provides another $24 million-plus to the city schools.

The school systems also expect another $11 million from the federal government’s Elementary and Secondary School Emergency Relief Fund, which can be spent through 2024. The CARES Act provided $2.9 million last year, roughly $600,000 of which is left, officials said.

Hammersley is recommending:

Chapel Hill-Carrboro City Schools: $56 million for CHCCS, plus $4.3 million for ongoing capital expenses, maintenance and information technology infrastructure. CHCCS received $53.4 million last year and asked the county this year for $61.8 million.

Orange County Schools: $36.9 million for the OCS district, which also would get $6.4 million for ongoing capital expenses. The county district also could get $3.6 million for deferred maintenance projects. OCS received $35.6 million in local funding last year and asked the county this year for $38.3 million.

Budget highlights

Next year’s budget includes:

▪ $244.1 million for education, public safety, human services and other day-to-day expenses

▪ $6.6 million for debt service, a 19.8% increase that largely will cover debt payments on school construction and affordable housing bond debt. County voters approved the $125 million bond in 2016. The debt payments are expected to remain stable over the next three years before beginning to shrink in fiscal year 2024-25.

Library funding: Hammersley recommended closing the McDougle Branch Library and expanding the Cybrary in downtown Carrboro. Operating hours at the main library in Hillsborough could be cut.

Recycling fee: The fee would remain $142.

County employees: Employees would not get a raise for the second year, unless the commissioners find $2.1 million for a 2% cost of living increase, Hammersley said. She included $425,000 for merit bonuses and raised the county’s Living Wage to $15.40 an hour.

Fire service taxes: Six fire departments — Damascus, Efland, Little River, Orange Rural, Southern Triangle and White Cross — have asked to increase the tax rates charged to residents who live in their fire service districts.

Social Services: The proposed budget uses $1.8 million in ARPA money to increase funding for organizations serving people in need.

Additional positions: The budget recommends two child support officers, a staff attorney, a Criminal Justice Resource administrative assistant (paid with ARPA funding), an assistant fire marshal, an eviction diversion expeditor, and three solid waste drivers.