Before we get to Commissioner Bill James’ take on the fiscal choices immediately ahead for Mecklenburg County — raise property taxes by one-fifth on homeowners or cut the county budget by one-fifth — a few more data points. Commission Chair Jennifer Roberts was in total denial yesterday when she talked to WBT’s Tara Servatius, bringing up fees and the sales tax as if they can much change the overall revenue picture.

The county almost must get $835m. out of the property tax, somehow. That is because sales tax revenue has gone from $242m. in fiscal 2008 to just $170m. for fiscal 2011, a 30 percent drop. At the same time the county has continued to bank on $180m. a year in state and federal revenue supplements, which means that state and federal money is now the second-largest source of revenue behind the property tax. In other words, the county really has no clue if 13 percent of its revenue is going to show up — or some smaller number. This also puts pressure on the property tax to deliver. Sales tax revenue, of course, will not reach 2008 levels until county employment returns to 2008 levels, which it is not going to do next year.

So, with that as backdrop, Commissioner James:

Mecklenburg’s Revaluation Risk

The hidden tax increase for homeowners using ‘revenue neutral’ is 22%

The budget cut to keep taxes on homeowners from going up is 19%

What are the candidate’s positions?

State law mandates a revaluation next year. Unless the legislature changes the law, Mecklenburg County will be forced to revalue all property effective Jan 1st 2011. The Party that wins in November will set the new property tax rate next year.

Normally, when property values goes up the tax rate goes down. The problem is that the rate decrease is almost always less than it should be forcing homeowners to pay more taxes. These revaluation shenanigans are often referred to as hidden tax increases, a way for government to rake in more money while pretending to cut taxes.

In 1997’s revaluation the Democrats (led by Parks Helms) were in charge and they set the rate 3.5 cents above ‘revenue neutral’. The tax rate went ‘down’ but government revenues taken from homeowners went through the roof. It is about here that most people stop reading because they don’t understand the term ‘revenue neutral’ and what it means to them.

Simply put, ‘revenue neutral’ is government code for a rate that brings in the same amount of dollars as the previous year.

In 2003 when the GOP was in-charge we set the rate 2.5 cents below revenue neutral (called ‘revenue negative’).

Voters have a decision to make that has not really been discussed and candidates have not been asked about it (yet). Where do candidates stand on setting a ‘revenue negative’ rate which will require cutting government services to prevent a tax increase on homeowners next year?

About 1/3 of Mecklenburg property is COMMERCIAL. About 2/3’s is RESIDENTIAL. In every revaluation, commercial property decreases because they get to depreciate their business assets. In the Great Recession we are in, this decrease in commercial property is magnified and made worse by the depression era values for these properties. They are dropping in value faster than even houses.

If Commercial property drops in value (or doesn’t rise as fast as residential since 2003) a ‘revenue neutral’ rate will mean massive tax increases for residential homeowners. I will assume that ALL property in Mecklenburg has gone up 12% since 2003 (the statement made by the current tax assessor a few nights ago) and that there is one piece of commercial property whose value has dropped by 30% since 2003 due to the Great Recession and Commercial Depreciation.

Our ‘one’ house in all of Mecklenburg County has increased in value since 2003 because home prices rose quickly from 2003 to 2008 before crashing. Even today, they most are worth more than their 2003 values.

In total, our one house and one shopping center Universe is split 1/3 commercial and 2/3’s residential as our current tax base is. The current tax rate is 84 cents per $100 of assessed value so let’s use that to calculate current ‘revenue neutral’ for this universe. There are two primary questions to answer:

· What would happen to that one Homeowner if we used a ‘revenue neutral’ rate?

· What would happen to the County budget if we used a rate that prevents that one homeowner from having a tax increase?

While commercial property gets to decrease because of depreciation, the increase in value of our one homeowner SINCE 2003 means that our one homeowner will have to pay a larger piece of the County’s property taxes after revaluation. Now the average house is not worth $670,000 however since residential property is roughly 2/3’s of all assessed value I am using that value to keep the ratio’s between residential and commercial in line with each other.

Some will say that the ‘one’ residential house would not go up from $670,000 to $920,000 (a 37% increase) but if Commercial property has dropped by 30% and the total value has increased by 12% as the assessor indicated that is the theoretical new residential value that is set. To the extent that the drop in Commerical value is not 30% and the rise in residential since 2003 is less, the gap or spread between the two reduces the rate needed to protect homeowners and limits the potential cuts to the County budget. Nevertheless, for purposes of this example let’s assume the worse based on what we know. …

Answers to questions:

· What would happen to that one Homeowner if we used a ‘revenue neutral’ rate? Taxes on that home would go up about 22%! [From $5,628 to $6,900- ed.] ‘Revenue Neutral’ is not so ‘neutral’ for a homeowner after all.

· What would happen to the County budget if we used a rate that prevents that one homeowner from having a tax increase? The County budget would have to be cut 19%!

So what do those running for office believe? I am for cutting the budget and preventing ANY tax increase on homeowners as a group.

I am for pledging that the rate will be no higher than ‘revenue negative’ to insure homeowners as a group have no tax increase.

It may be necessary to actually cut the rate even more to offset the spread in the change in values of residential homeowners but, at a minimum, candidates should pledge that residential homeowners AS A GROUP will not receive ANY tax increase from the upcoming revaluation next year.