If everything unfolded according to plan this afternoon, the wraps were taken off a plan to explode Mecklenburg County’s debt limit, the first step in a radical tax-and-spend agenda for local government.
The current debt limit target was adopted by the county commission in 2003 and stands at $3600 per capita and 16 percent of the county’s operating budget. Since then the county’s population has grown by about 20 percent while the county’s property tax base has grown from $69.1 billion in 2003 to $97.4 billion projected for 2009, a 41 percent increase.
Total county revenue in 2003 stood at $743 million, the latest budget expects revenue of $1.03 billion, or a 38 percent increase. Yet the county is so deep in debt that it is bumping up against its official debt limit, which in turn in drawing the attention of bond rating agencies like Fitch and Moody’s. A debt downgrade would destroy plans for more debt spending. The obvious solution? Raise the debt limit.
Now under consideration is a 37 percent increase in the percentage of the operating budget that could be used for debt service, up to 22 percent of the total operating budget. The per capita debt limit would receive an 11 percent bump to $4000, a huge increase considering the recent population growth. In fact, quick cocktail-napkin numbers indicate that the county would give itself about a billion dollars more borrowing room with the change.
What is going on?
Nothing less a than pre-emptive strike to make sure it is “impossible” for the county to roll back the tax rate once the on-going property re-valuation socks many county taxpayers with tax bills 10 to 20 percent higher next year. The first step in locking in the “need” for this revenue is the massive public debt — perhaps as much as $1 billion total in city and county bond issues — that seems headed for the November ballot. But bond underwriters and anyone paying attention might be spooked by the size of this debt smacking into the debt limit. Next step then, raise the limit.
If all the bonds pass, then the resulting larger debt obligation will put an ironclad claim on the new tax revenue the county — and city — will receive via the re-valuation process. The same process unfolded with regard to CMUD’s debt a couple months back. The city simply had to raise water rates 14 percent to pay off CMUD’s debt. Similarly, it will be effectively impossible to roll back the property tax rate in order to keep homeowners’ tax bills from making big jumps. Everybody wins.
Except you.
