Hilton Head council to residents: Expect a property tax increase

Hilton Head Island officials Tuesday said they continue to trim costs, but rising fuel prices, one-time funding needs and future "big-ticket" items will mean an increase in property tax bills.

Town Council discussed at length the town's proposed budget for the fiscal year that begins July 1 during a work session. General operating expenses would be trimmed by about $800,000 compared to this year, in part by eliminating three vacant positions within the Community Development Department and a part-time clerical position within the municipal court.

The town has reduced the number of employees from 262 "full-time equivalent positions" in 2009 to 255.5 for the current year.

Based on revised estimates, though, the proposed $32.7 million operating budget would be a $600,000 increase from what the town expects to spend this fiscal year. The increase includes a 1 percent merit-pay increase for town employees. Pay was frozen in 2009 and increased 1 percent last year.

Town salaries have since kept pace with the public sector but lag the private sector nationally, said human resources director Nancy Gasen.

Some council members questioned whether the pay increase was necessary. Councilman Bill Ferguson argued employees deserved a cost-of-living adjustment based on merit.

The town expects to collect more than $800,000 in additional property taxes through a tax increase, its largest in recent years. The millage rate decreased from 31 in 2004 to 19 in 2006. It was increased to 19.36 in 2009 and dropped to 18.54 in 2010.

The rate would increase to 19.35 for operating expenses. Millage rates to pay for public-improvement projects and debt would not change.

A home valued at $350,000 would be taxed an additional $11.34 if the millage rate increase is approved.

Town manager Steve Riley said that money will be needed later to pay for expenses associated with expansion and renovation of the Island Recreation and senior centers. Money will also be needed for new residential and commercial development in the Coligny area, and perhaps a new sailing center, he said.

In the meantime, Riley said the money should be used to hire consultants to aid in rewriting the island's Land Management Ordinance, buy new fire and rescue equipment and other one-time expenses.

For the most part, a 2006 state law prohibits counties and municipalities from raising property taxes to pay for town services beyond increases in population and inflation.

The 2010 U.S. Census showed Hilton Head's population rose from about 33,800 to 37,000.

"We have this one-time shot. It's use it or lose it," Riley said. "Do I have to have this millage increase? No. But ... looking out ahead, I think not taking it creates issues down the road."

Councilman George Williams Jr. said he would like the town to limit expenses through the end of the fiscal year and set aside increased property tax revenue until needed.

"I challenge us to really look at this a little harder and try to make sure we are monitoring the finances of the town for our citizens as best we can," Williams said.

Mayor Drew Laughlin argued doing so would require staff to make significant spending cuts or draw down reserves even further, neither of which he favored.

A public hearing and first reading of the budget is set for 6 p.m. June 14. Council is expected to give final approval at its June 21 meeting, scheduled for 4 p.m.