With the presentation of the draft 2014-2015 budget last Tuesday night, County Council will spend the next several weeks balancing perceived needs with estimated revenues.
One way to balance the budget is to raise the millage rate. This hasn’t been done since the 2007-2008 budget year. Yet several constraints limit Council’s ability to raise property taxes.
The amount of millage that can be raised by Council is limited by state law (6-1-320) to the percent increase in inflation plus the percent increase in population.
To illustrate, the population of Aiken rose 0.54 percent last year and the official inflation rate was 1.46 percent. Therefore, the total allowable increase in millage is 2 percent. Given that the current millage rate is 69.9, this limits an increase to 1.4 mills for a total of 71.3 mills.
Besides this legal constraint, Council has one overriding political consideration: preservation of the Capital Projects Sales Tax. Without that sales tax, the County’s revenue structure will collapse, requiring several years of non-stop millage hikes to make up the loss. In the meantime, road paving, road resurfacing, and capital equipment replacement – police cars, ambulances, graders, etc. – will grind to a halt.
Council is sensitive that the Capital Projects Sales Tax is popular, albeit marginally so. It originally passed by a bare majority in 2000, was reinstated with 60 percent of the vote in 2004, and with 55 percent in 2010. It will likely face the voters again in 2016.
Council knows that it must be careful, since many voters who supported the sales tax assumed an informal quid pro quo between passage of the Capital Projects Sales Tax and no millage hikes. This consideration may have provided the winning margin in 2010.
But what happens if Council hikes taxes this year? If the City of Aiken raises its millage? And if voters approve an additional one cent sales tax for school construction?
Each one of these tax hikes – in isolation – minimally impacts residents.
But in combination, a penny here and a penny there, a mill here and a mill there, this quickly becomes a significant incremental tax burden.
At this point, do the odds of the Capital Projects Sales Tax passing a fourth time increase or decrease? While the political calculus is complicated, today’s actions will impact tomorrow’s election results.
Furthermore, the local economy hasn’t fully recovered from the Great Recession. Many high-paying manufacturing and construction jobs have been replaced with lower-paid service sector jobs.
According to the recently published “Regional Economic Benchmarking Report for Aiken County,” inflation adjusted per capita income fell in Aiken County from $33,647 in 2012 to $33,319 in 2013. Likewise, average weekly wages fell from $873 in 2011 to $822 in 2013.
Therefore, any tax increase will fall on an already struggling populace whose disposable income is increasingly squeezed.
An increase certainly won’t help retail sales, which remained stagnant between 2011-2012 and 2012-2013.
Lastly, the new Government Center indirectly puts Council in an uncomfortable position in the court of public opinion.
On the one hand, Council wisely structured the facility so that debt service millage will remain relatively flat. This is due to a happy conjunction between low interest rates for the new debt, the clever structuring of the new debt’s principal payments, the refinancing of some old debt and the retirement of other old debts.
On the other hand, a perceived causal connection between tax increases for county operations and the new Government Center, even if largely illusory, is inevitable.
After all, voices will claim, without the new facility the debt service millage could have been lowered and applied to operational needs, such as increased pay for Sheriff Michael Hunt’s deputies.
These constraints on millage hikes, however, shouldn’t preclude Council’s consideration of radically altered budgetary priorities. Hunt’s compelling request is a good example. If giving raises to deputies becomes Council’s top priority, then it should be at the expense of less important functions. Alternatively, Council could consider employing a smaller but better-paid workforce.
And if a specific request can’t be met this year, then it may be met over time.
What can’t be bit off all at once may be achieved with three or four smaller bites.
Hard choices must be made. Council, unlike Congress, must balance its budget.
But an immediate resort to tax increases reflects both a lack of political will and a lack of prioritization. Tax hikes should be the last resort, and they may prove more trouble than they’re worth.
Clearly, imagination and creativity on Council’s part are needed now more than ever.
Gary Bunker is a former Aiken County Councilman.
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