Kelly Kenoyer: Ok, Ben, you checked in on New Hanover County’s first round of budget talks. What was on the agenda?
Benjamin Schachtman: So, this was all pretty high-level, they looked at the economic forecast, and the increase in property tax revenue – and the costs of doing business as a county.
KK: Ok, let’s get into it – what’s the economic outlook?
BS: So, it’s pretty good. Inflation is down, interest rates are cooling off, North Carolina GDP has recovered from Covid, unemployment in New Hanover County is, I believe, the second lowest in the state at 3%. Only Currituck’s is lower. So, basically, the county’s financial team doesn’t see a recession coming, and most indicators are positive, so that’s factoring into how they budget.
KK: So, they’re not planning any severe austerity measures.
BS: Exactly. They wanna be responsible, but they’re not worried – and there’s also more money coming in this year.
KK: Because of the property revaluation, which they do every four years.
BS: That’s right, I think by law these have to be done every eight years by New Hanover voted some time ago to do them more frequently. Without getting deep in the weeds, the reval process looks at location, property condition, and recent sales data to try to bring the assessed value roughly in line with fair market value.
KK: And given the dramatic increase in property values over the last four years, a lot of properties are probably being taxed on a value that’s a lot lower than what it would get on the market.
BS: Exactly. So, last year that difference between real property value and the current valuation really put stress on the county’s finances. So this year, assessed values will catch up.
KK: By how much?
BS: They’re still working on that, notices should go out at the end of the month. But they’re ballparking three scenarios for average increase. On the low end, there’s a 55% increase, that would net an extra $127 million in revenue, on the high end, there’s a 75% increase, which would net $173 million, and in the middle a 65% increase, which would bring in $150 million.
KK: So, that’s a lot more money than the county brought in through property tax last year. What does that mean?
BS: Well, some of that could offset inflation, the increased cost of doing business as usual – which has gone up by 23% since 2021, the last time they did a reval. That comes out to about $68 million dollars.
KK: That’s at least the cost of a dozen eggs these days.
BS: [Audible sigh]. But beyond that, one option would be to adjust the tax rate, account for inflation, and set it there — that would drop it from 45 cents on every $100 of property value, where it is now, to between 33 cents and 38 cents.
KK: Lots of numbers there, but basically, depending on how much property values go up, the county could maintain the services it delivers now, but cut the tax rate.
BS: Yeah. So, there’s basically that scenario, or the county could cut its tax rate even more, but that would involve cutting spending to cover inflation. The county could also cut taxes, but by less, and have more funding at its disposal.
KK: What exactly would that entail?
BS: Well, there’s a number of things that were funded last year by Covid funds that are drying up — like workforce housing and Pre-K expansion — and some things like school nurses and therapists that were covered by the the county’s mental health and substance abuse fund — that’s $50 million from the sale of the hospital. So extra revenue could cover those things.
There are other suggestions too, like boosting salaries for merit and cost of living, paying off the county's debt, updating facilities and equipment, and other public projects — lots of things, some of which have been on a wish list but not funded before.
And there are also other entities the county helps fund — like WAVE public transit and the public schools. Now, the county recently boosted its investment in WAVE and, among the North Carolina counties, I think New Hanover is the 7th highest when it comes to funding schools — but we’ve heard from advocates who would like to see the county do more in both of those areas.
Again, these are basically high-level suggestions, it’s up to the county commissioners how they want to balance the tax rate and services — and they haven’t gotten into that level of granular detail yet.
KK: OK, so what’s next?
BS: A whole lot of number crunching, more meetings for staff and commissioners, and in theory, we’ll have a recommended budget in mid-May, and that’ll get approved in mid-June. Although, in the past, it’s come down a little closer to the wire than that.
KK: Ok, Ben, thanks for following this.
BS: Happy to do it!
Budget presentation from the January 30 New Hanover County Board of Commissioners' budget meeting.
FY26 Budget Worksession by Ben Schachtman on Scribd