Charlotte Budget Takes Another Big Hit; Carlee To Order Hiring Freeze
The city of Charlotte faces a gaping hole in the upcoming budget. A combination of state tax changes and Mecklenburg County’s property tax revaluation has city officials scrambling to plug the gap.
The city has already been preparing for a nearly $20 million hole in the upcoming budget, which starts in June. State lawmakers eliminated a problematic business license tax last year, but have not provided another way for local governments to recover the lost funds. Governor Pat McCrory included no “fix” in his budget, nor have state lawmakers introduced legislation.
Now, City Manager Ron Carlee told City Council, lower property tax revenues have widened the gap.
“Much to our surprise, the revaluations are substantially lower than anything that was ever predicted,” Carlee announced.
A botched property tax revaluation in 2011 caused erratic changes, so Mecklenburg County hired a private firm to redo it. In the past three months, the firm has adjusted property value down $2.2 billion — well outside its own projections.
The change in property values has less of an effect on the county's budget because it relies more on sales taxes. In fact, County Manager Dena Diorio says a bump in sales tax revenue should make up for its share of lost property taxes.
But the lowered value cuts city property tax revenue by a projected $14 million next year. Together with the lost business tax, it’s a big hit, says Charlotte’s chief financial officer Randy Harrington.
“The scope that we’re talking about here is larger than the impacts that we had from the great recession, in terms of the immediate cuts we did,” Harrington says.
The lower property value also means $9 million in lost taxes for the current budget, wiping out this year’s surplus.
“This is not because we’re in a bad economy. It’s not because of financial mismanagement,” Clodfelter said after the announcement. “People are going to hold us accountable for what we do about the county’s inability to conduct a proper revaluation after five years, what we’re going to do about the fact that the state is essentially gutting the revenue system of North Carolina.”
Councilwoman Vi Lyles downplayed the effect and says the state cuts are just the new order.
“I don’t think it’s a huge difference, I think it was expected,” Lyles says. “The policies are going to shift. [State lawmakers] are not going to allow us to actually have a lot of discretion in our budget.”
Carlee said he will enact a citywide salary and hiring freeze Friday, with some exceptions, like public safety, to be determined.
“I always go into budget reduction efforts with a desire to avoid employee layoffs,” Carlee said. “Sometimes you can’t do that. But if you act early enough and you create a pool of vacancies, you have a realistic opportunity to help people keep their jobs."
But even after the freeze and a one percent cut to every department, Charlotte faces a more than 2.5 percent budget gap next year, with a larger cut looming. State lawmakers plan to redistribute sales taxes away from urban to rural areas. In a worst-case scenario, city officials project that could about double this budget hole.