Thursday’s board vote to set a public hearing on the proposed tax hikes followed a report from financial consultant David Rose of Davenport and Co.
Davenport had been working on a report on how the county can deal with debt service for county school facilities while facing needed county projects and a steep decrease in coal severance tax revenue in recent years.
Rose told the board that the county has maintained “very strong” credit ratings according to credit and bond rating firms Moody’s and Fitch for several reasons including;
- setting aside funds each year to pay normal bills until tax revenues start coming into county coffers and,
- a willingness to raise real estate tax rates to 60 cents per $100 assessed value in fiscal year 2014 and 62 cents in fiscal year 2018.
Since 2014, Rose said, the county’s coal severance tax revenue has dropped 64 percent to less than $2 million this fiscal year. That drop went beyond expectations, he said, and has affected the county’s tax revenues negatively.
Even with raising real estate tax rates in the past, Rose said, the county’s rate is still 6 cents below the statewide average. The severance tax drop is forcing the county to a point where it will have to start tapping uncommitted funds, he added.
Rose said the county is facing a climb in debt service payments on money used for school renovation and construction after consolidation, which means an annual payment of $6.22 million in 2023 compared to $4.34 million this year.
Rose said one way to reduce climbs in school debt service would be waiting for availability of state Literary Loan school construction funds to pay down that existing debt and reduce the interest to a roughly 2 percent fixed rate. That option depends on a smaller than expected pool of loan funds from the state and how far Wise County is down on a list of statewide projects awaiting priority for the money.
In order to stabilize the county budget in the face of lost coal tax revenue and waiting for Literary Loan money, Rose added, the county should consider a 7-cent increase in the real estate tax to cover school debt service and another 1.9 cent increase to cover an identified $10 million in county related improvement and capital projects.
A second scenario, Rose said, would mean raising real estate tax overall by 4.9 cents and use county borrowing to refinance the debt.
County Administrator Mike Hatfield said after the meeting that $14 million for school construction debt comes due in October. That, along with an expected delay in getting Literary Loan funding, could make the second scenario more likely for the county.
Supervisor chairman Robbie Robbins later moved that the board consider adopting a 7-cent increase in the real estate tax rate to 69 cents per $100 assessed value. After Supervisor J.H. Rivers asked why a rate was being adopted before any discussion or public comment, Robbins clarified that the motion was to set a rate for public comment and board discussion soon enough so a final rate no higher that 69 cents could be adopted without a lengthy repeat cycle of public comment.
Rivers said he was concerned that he didn’t know what each penny of a tax increase would mean in revenue for the county. Hatfield said a one-cent increase in the real estate tax would mean an additional $330,000 in revenue, while a one-cent increase in the personal property rate would mean an additional $40,000 in tax money.
The board finally agreed to set a 7-cent increase in the real estate tax, personal property, mobile home and merchant capital tax rates for public discussion at a hearing April 11 at 6 p.m. at the Education Center on Lake Street.