BY JAMES B. MALLORY III
Iredell County Manager Beth Mull is putting the finishing touches on her budget message and recommendations to the Iredell County Board of Commissioners for the FY 2023-2024 budget as well as updating the county’s long-term capital improvement plan.
While considering funding for county operations, the commissioners will also need to determine to what extent the county can reasonably cover the gap between the voter-approved $80 million school bond and the actual cost of the new Weathers Creek High School. Iredell-Statesville Schools has requested up to $170 million for the facilities, plus up to $30 million for fixtures, furniture and equipment.
If the past is prologue, the county manager’s recommendations will be based on the commissioners’ longstanding desire for conservative economic assumptions, limited budget growth and maintenance of the lowest property tax rate in the Charlotte region. Since the 2008 recession that lasted two years and was followed by lackluster growth for the better part of a decade, this approach has served the county well.
For historical context, taxes were lowered two cents to 46.5 cents per $100 valuation following the 2007 reappraisal, but with a recession-driven decline in property values for the reappraisal in 2011, the commissioners reluctantly raised taxes by 4 cents to a 48.50 cent rate in order to meet basic services and begin a pay-as-you-go savings plan to build a badly needed new detention facility.
In 2014 the voters approved a $131 million school construction bond which increased the property tax by 4.25 cents to a 52.75-cent rate. Commissioners did not increase taxes for any county budget requirements. Six years later, in 2020, the tax rate was increased by one cent to the current rate of 53.75 cent per $100 valuation based on the voter-approved $125 million school construction bonds.
In 2018 the two economic development corporations serving Mooresville and Statesville/Troutman merged into the Iredell Economic Development Corporation, creating unified marketing and workforce development strategies that have been critical to the solid and diversified industrial growth experienced in Iredell County. This growth increased tax revenues by adding above-average wage industrial properties to the tax rolls, which explains why two nearly identical school bonds in 2014 and 2020 were able to be funded with a 3.25-cent difference in the tax increase. Industrial and commercial growth, together with the inevitable residential growth fueled by the Charlotte regional economy, has resulted in a 42 percent increase in property values in the 2022 revaluation.
I would submit that we are now operating in a different economic paradigm than the past 15 years. Unlike our relatively static property values in the four years between revaluations, we are now experiencing recurring growth from year to year. This dynamic increases our ability to fund annual increases in the operational budget due to annual increases based on new commercial and residential properties being added to the tax rolls every year. Likewise, sales taxes are rising based primarily on population growth.
While the country may experience a recession as the Federal Reserve continues to raise interest rates to combat inflation, those are all average national figures. In a recession there are communities and states that are winners and losers, and North Carolina, the Charlotte Region and Iredell County will be among the winners. Our growth rate may moderate, but it will still be significantly more than we have experienced in the past.
What we will have for the foreseeable future are the highest inflation rates since the late 1970s and early 1980s. With inflation driving up the costs of construction and the operational budget, the pay-as-you-go approach becomes a money loser as the cost of inflation eats away at the purchasing power of every dollar saved. Prudent borrowing, reducing the scope of projects and building sooner at a lower cost, while paying back funds in inflated dollars, becomes more attractive for larger capital expenditures, especially when you can refinance loans or bonds at lower rates when the markets cool down.
Thus, the county manager’s recommendations will be an excellent starting point, but must be tested by examining the underlying economic assumptions and running scenarios using different variables to determine the right mix of pay-as you-go for smaller projects, short-term borrowing for mid-sized capital projects and long-term borrowing for larger capital needs. The county has an excellent analytic program that can run multiple scenarios which can aid the commissioners in finding the sweet spot to accomplish our capital needs while delivering a reduction in the tax rate to be competitive with our neighboring counties and lessen the tax burden on the taxpayer.
James B. Mallory III is a practicing attorney, retired major general in the U.S. Army, and former chairman of the Iredell County Board of Commissioners.