The city of Danville faces uncertainty in how much growth, if any, the current reassessment of real property in the city will yield, so it has advertised an effective tax rate increase even though the increase may not materialize.
The effective rate is the difference between the proposed tax rate and the lower rate necessary to be revenue neutral, excluding additional assessments due to new construction or improvements to property.
As it stands, City Council proposes to maintain the current tax rate of 73 cents per $100 in value of property. Current projections indicate the reassessment could produce as much as a 2 percent gain in revenue. If that gain were realized, then a levy of 71 cents per $100 valuation would produce the same amount in revenue on the same properties as the prior year.
“We do not know if there will be an effective rate increase,” Deputy City Manager Ken Larking told City Council during a special budget work session held Tuesday night. “We are only advertising this out of an abundance of caution.”
The uncertainty exists because the reassessment process is less than 50 percent complete. The current projections may not hold.
If the final reassessment numbers show less growth than projected or no growth, then City Council members indicated Tuesday that they remain committed to no increase in the current 73-cent tax rate.
“Whatever it (assessed value) is, we will not vote to go above 73 cents,” Mayor Sherman Saunders said Tuesday night.
Councilman Buddy Rawley added, “If it (assessed value) comes in less, then we will cut something.”
The city is reassessing all properties this year in Danville. This process takes place every two years.
By law, the state requires cities to advertise effective rate increases. Advertising an increase in the rate does not prevent governing boards from lowering any advertised tax rate, but a higher tax rate cannot be imposed without advertising the higher rate.
In the last reassessment, effective July 1,2012, the total assessed value of real estate property in the city decreased 1.1 percent, but City Council kept the levy at 73 cents per $100 valuation rather than increase the rate to generate the same amount in revenue on the same properties as the prior year. Since then, taxpayers whose property values declined have been paying less in taxes.
City Council met Tuesday night to continue its review of a draft version of the city’s budget for the next fiscal year, which begins July 1.
The process includes a department-by-department review. Departments under review last night were public works, information technology, transportation, and community development. Constitutional and judicial office budgets also were reviewed.
Last week, City Manager Joe King presented to City Council an initial version of the city’s budget for the next fiscal year. This working draft maintains services, programs and facilities at current levels. The current real estate tax rate of 73 cents per $100 is maintained, and no fee increases are proposed. Use of cash reserves and moderate increases in debt financing make it possible to balance the budget.
The city’s charter requires the city manager to present a recommended budget to City Council by April 1. Following that presentation, the charter requires the city manager and City Council to work together in modifying the budget into a formal version for presentation to the public no later than April 30.
King made his recommendations early to enable City Council to undertake a more extensive review of the budget. Toward that goal, City Council is meeting every Tuesday evening this month for budget reviews. Last week, City Council reviewed budget drafts for the city manager and city attorney offices, and finance, human resources and utilities departments.
Next week, reviews are scheduled for parks and recreation, police, fire, and economic development departments.
Public hearings will be scheduled later in the budget process. Final adoption must take place no later than June 30. The final budget will serve as a blueprint for city operations from July 1, 2014, through June 30, 2015.