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Middlesex faces $800,000 shortfall

by Larry S. Chowning

“We thought 35 cents (tax rate) was what we needed. Actually, we needed to set the rate at about 38 cents. Then we would have had the funds needed to run the county.”
—Charles Culley

Middlesex County taxpayers may be facing another real estate tax hike this year due to a revenue shortfall in the current FY09 budget.

Supervisors were informed Tuesday the county collected $800,000 less than budgeted in real estate tax revenue due to a miscalculation in a reassessment year.

The county reassessment was not completed until December 2007 and the appeal process went on until June of 2008.  The county set the tax rate of $.35 on a $100 worth of real estate value in May 2008, as required by law, and before the reassessment appeal process was complete.

County administrator Charles Culley said the estimated real estate tax revenues in the FY09 budget were determined by the total amount of the reassessment provided by the assessor in December. As a precaution, Culley said he took the reassessment revenue figures and reduced them by 5 percent.

However, this obviously was not enough. 

Over 1,000 county property owners appealed their assessments, and many were successful at getting their real estate values lowered. These lower values generated less-than-expected tax revenues—to the tune of $800,000, indicated Culley.

So in essence, the county treasury has $800,000 less than anticipated to operate the county in FY09, which ends on June 30 of this year.

Culley said the budget and the 35-cent tax rate were figured on the county taking in $8.9 million in tax revenue in 2008-09.

Also, state revenues to the county are down and there are fewer building fees and permits being issued because of the weakened economy. The county has already laid off one building official because the workload in that office has decreased so much.

The 2008 reassessment shifted the burden of taxation further onto waterfront property owners. This, said Culley, meant many people living away from the water and those owning agriculture and timber land actually had their taxes lowered.

Culley noted Middlesex has the fifth lowest real estate tax rate in the state, behind Accomack, Grayson, Lunenburg and Mecklenburg. 

He also pointed out that even though waterfront property owners were hit hard by the reassessment last year, the majority of county homeowners and landowners were spared a tax increase.

Saluda District supervisor Jack Miller said that the entire system is unfair because the waterfront people “got pounded” while some citizens living inland received a tax cut in FY09. 

Culley agreed. “If you own waterfront and it went up 100 percent, then your taxes went up even at the lower 35-cent tax rate,” he said.

“We thought 35 cents was what we needed,” he said. “Actually, we needed to set the rate at about 38 cents. Then we would have had the funds needed to run the county.”

Culley also reminded the board that the 2008-09 budget process started in the spring of 2008 before the bottom fell out of the real estate and building market. “Who could have known that all this was going to happen?”

Another issue that caused cash-flow problems is that in the month of August 2008, all of the county’s debt service expenses came due, and it took a large amount of the real estate tax dollars from the June collection to pay those bills. This left the county having to wait until the December collection for its next large influx of tax dollars. (Middlesex collects real estate taxes twice in a calendar year—June and December).

Over the years, Middlesex has used its fund balance (surplus) to pay bills until new tax dollars are collected and the fund balance is repaid. “If we don’t do something, we are not going to have enough money coming in to put it back into the fund balance,” Culley said.

Supervisors appeared surprised by the bad news, and agreed to meet again on Thursday, April 2, at 1 p.m. to continue the budget discussion. 

posted 03.25.2009

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