Beaufort residents will likely pay next year for this year's continued declining property values.
And that cycle could continue until the economy rebounds and brings values up to a sustainable level, according to city manager Scott Dadson.
City Council granted initial approval to a $16.87 million budget for next year during a meeting Tuesday. It also granted initial approval for a temporary 3.72 "deficit mill," which would raise about $257,000.
Final votes on both are expected June 10.
Never miss a local story.
That deficit mill, however, won't cover the full $345,000 deficit that city officials anticipate from this year.
The deficit is a result of factors stemming from changes in business licensing on the state level and a decrease in property tax collections.
When Beaufort County reassessed property last year, the city was allowed to adjust the tax millage rate so it could collect the same amount as in previous years.
However, values have dropped another 5.6 percent because of appeals, Dadson said. Coupled with a 92 percent collection rate instead of the usual 97 percent, the city's income has taken a hit.
"The county's estimate shortchanged us," Mayor Billy Keyserling said. "This makes up the gap for one year and this allows us to go beyond what would be the statutory limit" for adjusting the millage rate.
On Tuesday, resident Kathy Lindsay questioned whether the deficit tax would continue in the future.
It could, Dadson said, although council would need to vote on it annually. He said it could take seven to 10 years for property values and the city's property taxes to rebound, according to figures by county assessor Ed Hughes.
Former Mayor David Taub challenged City Council to do something about the city's $19 million in debt.
The debt has accumulated over the years for projects such as building City Hall, the police and court building and a fire station; repairs to Henry C. Chambers Waterfront Park; and purchasing the Beaufort Commerce Park. Counting principal and interest on the debt, the city is paying about $2.2 million this year.
Taub said by his math, the city could save about $3.5 million if it pays off the debt by 2018. Some of the bonds involved have restrictions that don't allow the city to pay off the money before a certain time.
"That debt is bone-crushing, it is an anchor around the city, an anchor at the bottom of the Beaufort River and you're just barely above water," he said.
City finance director Kathy Todd said she didn't know Tuesday whether Taub's savings estimates were accurate, but she disagreed with his calculation that the total debt -- which, before any payments, was $24 million -- carried a 40 percent interest rate. Taub calculated the city would end up paying $34 million on that debt.
Follow reporter Erin Moody at twitter.com/IPBG_Erin.
- Beaufort City Council continues to mull 2015 budget, May 20, 2014
- Beaufort seeks options to pay for underground utilities on Boundary Street, May 22, 2014
- SCE&G customers on Boundary Street could see 7 percent increase on bills, May 20, 2014
- Beaufort eyes tax hike, spending cuts to balance budget, April 30, 2014