County taxes add up to way to reduce debt
By Andrew Bell
Published in News on November 13, 2005 2:00 AM
Since July, residents throughout Wayne County have asked the same question Phyllis Smith of Rosewood has concerning the recent increase in the county tax rate.
"I wonder what the reason is?" Mrs. Smith asked.
Mrs. Smith, and her husband, Kenny, said there is only so much the county should expect people to pay out of their income. For example, Smith said his son and daughter-in-law just moved into a new house. For a 1,100-square-foot home, the couple pays more than $500 a year in property tax. Including insurance costs, but not including other county and city taxes, the young couple are expected to pay $1,200 per year at their new residence.
"At that age, you just struggle making a living and the county expects them to have to pay more out of their pocket," Kenny Smith said. "It's ridiculous."
In July, the county increased the tax rate from 66 cents per $100 to 73.5 cents, Wayne County Tax Administrator David Ward said. The city rate also increased from 60 cents per $100 to 65 cents.
All Wayne County residents must pay the county tax.
Those who do not live in Goldsboro or one of the other six municipalities located in the county -- Mount Olive, Fremont, Seven Springs, Pikeville, Walnut Creek or Eureka -- are still subject to taxation if they live in one of 30 taxable fire districts, Ward said.
The fire district tax, ranging from two to eight cents per $100, is used for fire protection and to support the fire departments throughout the county.
There are 30 fire districts throughout the county. Eight, including Eureka, Thoroughfare, Little River, East Wayne, Antioch and Faro, charge eight cents per $100. While the majority charge six or seven cents, Moseley Hall fire district is the only one in the county that charges two cents per $100, according to the Wayne County Tax Department.
Residents living in one of the municipalities are required to pay the county tax and the municipality tax that applies to them, Ward said. Goldsboro residents are assessed the county and city taxes. However, there are more taxes each resident is required to pay.
In North Carolina, counties are given the ability to levy taxes on, to name a few, real estate, an individual, a licensed vehicle and a business, Ward said.
Of these taxes, county finance director Norman Ricks said sales and automobile taxes are collected monthly. Meanwhile, the county will collect property tax from residents until the Jan. 6 deadline.
The county uses these taxes as revenue to cover the expenditures incurred throughout a fiscal year. During the fiscal year of 2003-04, according to the State of Wayne, a county analysis booklet, the county collected 42 percent of its revenue from local taxes. Other sources of revenue come from the sales tax, state funds, federal funds, fund balances and other revenues.
However, by spending the revenue from some these sources, the county can cause more harm to itself economically. Essentially, a fund balance is a savings account that the county is legally obligated to have, County Manager Lee Smith said. According to North Carolina law, each county must have 8 percent of its budget as a fund balance for emergency use.
During the late 1990s, the county used money from the fund balance to offset its cost of operations. By spending the fund balance annually to offset costs, Smith said the balance decreased from $32 million to under $20 million in three years.
"Now, we don't use savings for our operations," Smith said. "We only spend it when our revenue is over our expenditures."
Smith said he realizes that nobody wants a tax increase. However, he and the county commissioners realized the county would need to stabilize its finances. Otherwise, Wayne County could put itself in a position of not being able to borrow money from a bank.
While the county continuously spent from the fund balance, the county's bond rating decreased. This, in turn, caused the county's credit-worthiness to decrease, Smith said. With these two factors against the county, it became more difficult to borrow money for future projects.
"We were depleting our reserves in the past," Ricks said. "The county commissioners felt we should stop the bleed, so to speak."
One way to stem the loss from the fund balance is through interest rates. As a separate account, Ricks said the fund balance is able to draw interest. Also, the interest received from other county investments helps to offset the tax rate. At one time, the interest helped offset the tax rate by as much as five cents, but that has decreased in recent years.
For example, the county plans to earn $575,000 in interest earnings next year. Dividing the revenue from ad valorum taxes, $575,000, by the tax rate, 73.5 cents per $100, shows that the interest earnings help offset the tax rate by one penny, Ricks said. This might not seem like much, but he said one penny has a tendency to add up as the year progresses.
Of the 7.5 cent increase in the tax rate, Smith said 2.5 cents is used to reduce the fund balance usage from previous years. Eventually, by increasing the fund balance, the county should be able to set aside money to fund future industrial development.