Tax rate may drop in Cumberland, but bills will still climb
The number on the real estate tax rate may look lower, but the bill itself won’t be. Due to significant increases in property value, most people in Cumberland County would end up paying the same, if not more, if supervisors approve the proposed rate.
At the board’s public hearing, set for Tuesday, April 16, Cumberland Administrator Derek Stamey will present a budget based off a proposed real estate tax rate of 60 cents per $100 of assessed value. That’s a dramatic drop from the current 75 cent rate, but due to property reassessments and transferring money from the reserves, revenue would remain close to the same. The reality is since the last reassessment four years ago, property values in Cumberland have spiked by 30%. At the same time, as many other areas have experienced, the cost of doing business, that is the cost of everything from a new ambulance to needed sewer line repairs, has gone up. As a result, supervisors have been working through weeks of budget workshops to find ways not just to balance the budget, but try and absorb some of the pain the next tax bills will bring.
“Let’s say the average home here is $225,000,” said Board of Supervisors Chairman John Newman. Speaking at the board’s March 28 budget meeting, Newman pointed out that even under the 60 cent tax rate, an average home owner wouldn’t see a drop in taxes. “(For $225,000 home owners), that’s an increase, to them, of $50. I feel for the people. That $50 is a lot of money to them.”
It’s why, Newman said, he couldn’t agree to go higher than 60 cents on the proposed tax rate. He didn’t want to see taxes rise for residents.
The proposal and the problem
The proposed budget comes in at $41,434,636, an increase of $66, 214 over the current year.
It comes with a problem attached, as at a 60 cent tax rate, that doesn’t fully cover all expenses. But supervisors were determined to lower the rate, both in order to help residents avoid a massive spike in their reassessed tax bills and to try and start competing more with neighboring counties, all of which have real estate tax rates below 70 cents.
And even if the proposed 60 cent tax rate goes into effect, there would still likely be a significant increase on everyone’s tax bill, just due to how much property values went up.
Some supervisors questioned dropping all the way from 75 cents to a 60 cent tax rate, just because they questioned if it was sustainable.
“We’ve got to get to a number that’s durable not only for this year, but for next year as well,” said Supervisors Vice Chair Eurika Tyree. “I don’t want to play this game with people. We need to set it so it’s doable and we can always go down.”
In the budget meeting, Tyree said lowering the rate more than the county can sustain might help in the short term, but people will be up in arms if supervisors end up having to raise it back up next year. Instead, it needs to be a sustainable number, one the county won’t struggle with. And to be clear, county staff made it clear this will be a struggle at a 60 cent tax rate.
“I’m in managing expectations mode right now for staff, the board and residents,” Cumberland County Administrator Derek Stamey said. “The operational impacts are going to be felt. We’re looking at ways to deal with this internally (but) there’s gonna be an impact to services. I’m worried about staff burnout, I’m worried about getting the stuff done and doing it right.”
A tax rate and new revenue
That’s the no-win situation supervisors find themselves in. They couldn’t leave the tax rate at 75 cents, as due to the reassessment many residents would not be able to afford the bill. Also, as Newman pointed out, tax rates need to be lower in order to attract economic growth.
“It is important for us to stay low while we’re doing economic development,” Newman said. “(A) grocery store is going to be partially dependent on it. (A) senior community, retirement community, they’re all dependent on a tax rate that’s fair compared to your other counties. It’s a good position to be with your peers on rate.”
And by far, Cumberland at 75 cents has one of the highest real estate tax rates in the region. Buckingham is currently at 55 cents, with a proposal to increase to 60. Prince Edward plans to stay at 51 cents. Powhatan is at 69.
So the rate needs to drop to try and help attract business. But in dropping it down to 60 cents, trying to get as close to a zero change as possible, that means the county is operating at a deficit. And yes, as Stamey pointed out in budget hearings, there is enough in the general fund to cover that deficit now, as long as the county scales back some expenses.
“You’re operating at a deficit,” Stamey said. “The board has to be aware we’re gonna have to have a plan to replace those revenues.”
The simple point is that with revenues not increasing, you can’t take from the county’s fund reserves to balance things out forever.
Where are new revenue sources?
The long-term solution, all supervisors agreed, is to bring in more businesses to help share in the tax burden.
“We need to get a better handle on what revenue projects are out there,” Newman said. “We need to go to EDA (Economic Development Authority) and say we need to fire up a couple projects, go after development and go after a grocery store. We need to look at every option.”
Tyree asked why EDA officials weren’t coming to supervisors on a monthly basis, providing updates on the work they’re doing. Every other department in the county does that, she added.
Stamey said they could work on having EDA officials do that.
Moving forward with tax rate
And so, board members have set a proposed real estate tax rate of 60 cents per $100 of assessed value to be discussed at the public hearing. Stamey warned, however, that going low could have unforeseen consequences down the line.
“If anything breaks, we haven’t budgeted for it, so we’ll have to come back and seek appropriations for it throughout the year,” Stamey told supervisors. “And then, that fund balance gets lower. I’m just trying to paint the picture for the board of what the impact is.”
The public hearing is set for 7 p.m. on Tuesday, April 16 in the Cumberland Courthouse Circuit Courtroom.