Local governments need state guidance on tax rate

The debate over property tax rates in Beaufort County will take an interesting turn if local governments are forced to "roll up" rates after a countywide reassessment that is expected to knock off about 20 percent of the county's tax base.

The county has sought advice from the state Attorney General's Office on whether it can increase tax rates after the 2012 reassessment. State law aims for local governments to stay revenue neutral, but that's generally intended to keep them from collecting a windfall due to increased property values.

That is not likely to be the case after our next reassessment. Our last reassessment was based on values as of Dec. 31, 2007. We all know what's happened since then.

The S.C. Association of Counties maintains that state law could require a roll up. Figures are put into a formula under state law, and if that results in a tax rate increase, then a tax rate increase it is.

If true, Beaufort County should continue to tighten its spending belt and put any additional money into its reserve account. That could reduce pressures to raise taxes in future years and could help save money by keeping borrowing costs down. And the county should move to reduce the tax rate as soon as possible after that, assuming no great harm to services provided and its reserves.

If the county has discretion in how much it rolls up the rate, then County Council will have to balance the impact on those whose property values increased, held steady or declined less than the countywide rate of decline.

For some, even a tax rate increase will mean a smaller tax bill if the property's value has declined at a rate greater than the tax rate increase.

While we spend a lot of time focused on the revenue side of the budget by way of the tax rate, the spending side warrants more attention.

With an increasing tax base, we've had the luxury of increased spending even as we kept a lid on tax rates.

After the last reassessment, the county's tax rate dropped from 51.9 mills in fiscal year 2009 to 45.9 mills in fiscal year 2010 even as property tax revenue held steady.

In fiscal year 2009, the county collected $74 million in property taxes; in fiscal year 2010, it collected $72.8 million, according to audited county financial statements.

Total spending was $96.1 million in fiscal year 2009 and $97.8 million in fiscal year 2010.

In 2009, the county's reserve fund increased about $1.2 million; in 2010, it decreased about $2.7 million.

Fiscal year 2011 isn't looking any better. Last month, the county announced that some county employees would have to take unpaid time off to try to reduce an expected budget deficit. Slow tax collections and reduced revenue were expected to result in a $1 million to $2 million deficit.

And it's not just property tax revenue that has been off the budgeted mark over the past several years, although that's where the biggest hits have come. Property tax revenue was off the budgeted amount by $6.1 million in fiscal year 2010, down from $78.9 million to $72.8 million. That figure was off $2.6 million in fiscal year 2009.

The Attorney General's Office should make haste with its opinion on the roll-up question. Local governments need to know what's coming as they make decisions today. Some guidance would be welcome in Beaufort County and elsewhere.