Starkville aldermen on Tuesday debated raising property taxes by two mills in the Fiscal Year 2021 budget to offset an anticipated $1.1 million budget shortfall, with some aldermen who usually oppose tax increases firmly in favor of this one.
“You know I don’t (usually) vote for a tax increase, but I’m just wondering where the funding is coming from if we don’t do something,” Ward 7 Alderman Henry Vaughn said.
The anticipated $540,000 in revenue from two additional mills would only cover about half of the projected shortfall. The city’s sales tax revenue in FY 2021 might see a 12-percent drop, marking an $880,000 decrease from this fiscal year, after the COVID-19 coronavirus pandemic started limiting business and social activity in March.
The projected shortfall also took into consideration the potential cancellation of the college football season in the fall, Ward 2 Alderman Sandra Sistrunk, the board’s budget chairperson, previously told The Dispatch.
Mills are used to calculate property taxes, and the city determines each year how many property tax mills to levy. For a $100,000 home with no homestead exemption, the proposed 2-mill hike — from 28.13 to 30.13 — would increase the owner’s taxes by $20. For commercial properties, it would increase taxes by $30 per $100,000 in assessed value.
The budget also includes the 20-percent match of $3 million for the federal grant the city received last year to revamp a mile of Highway 182.
The $12.66 million grant from the U.S. Department of Transportation’s Better Utilizing Investments to Leverage Development, or BUILD Transportation Discretionary Grant program, would make the area more pedestrian friendly and wheelchair accessible, increase broadband access and improve infrastructure and stormwater drainage.
Failing to match the grant would force the city to return it to the Department of Transportation, Mayor Lynn Spruill said.
“The federal government will not look at us favorably for any additional federal funds if we turn a grant back, so that is not an option,” she said.
The city already anticipated at least a 1-mill increase for the BUILD grant match, Sistrunk said.
The budget also allocates $200,000 in FY 2021 as the first-year payment on a lease/purchase agreement for its police department’s body cameras.
‘Why we’re in this position’
Spruill and four of the seven aldermen expressed their support for the proposed budget, including the tax increase. The board held its first public hearing for the budget and will vote to approve it after the second hearing at the Sept. 1 meeting.
Starkville resident Stanley Miller told the aldermen he thought they should wait a few months to see if tax revenues increase again with Mississippi State University students returning to the area, but Sistrunk said the city does not have that option. The city has to adopt the budget by Sept. 15.
This would be Starkville’s third year in a row raising millage — increasing it by 1.05 in 2018 and 1.5 in 2019 — but the city still has a lower-than-average millage rate in Mississippi. Columbus has a millage rate of 51.24.
Being the home of a major university means “people come and throw a lot of money at us regularly,” Ward 5 Alderman Hamp Beatty said, but it is not guaranteed that MSU can hold sporting events or even maintain in-person classes. The University of North Carolina-Chapel Hill recently suspended in-person classes less than a week into the semester.
Beatty supported the tax increase, as did Vice Mayor Roy A. Perkins of Ward 6. Perkins and Vaughn voted against the millage hike for FY 2019 and were not present at the meeting last year to approve the FY 2020 budget.
Perkins said he would “very reluctantly” vote for the millage increase for two reasons: the loss of sales tax revenue since March and the fact that the BUILD grant will “enhance the aesthetics and economic development” of Highway 182.
“I don’t want to vote for it because there are people with low or fixed incomes that are struggling, but at the same time, that’s why we’re in this position to make this tough decision,” Perkins said.
Aldermen Ben Carver of Ward 1, David Little of Ward 3 and Jason Walker of Ward 4 all said they wanted to look at other options to cut costs and make up for the shortfall. Carver and Little said they have received calls from constituents worried about how they would make ends meet with higher taxes.
Carver said he was open to eliminating the BUILD grant or the police camera funding, and he suggested closing one of the city’s five fire stations for a year. Spruill and the other aldermen disagreed.
“I don’t think we should jeopardize our fire rating, because we did just get it,” Spruill said, referring to an upgrade in the city’s fire insurance classification in July from the Mississippi State Rating Bureau.
The city is also considering delaying its debt payment for a year, which would save the city $575,000, Sistrunk said. The delay would not affect the current interest rate but could harm the city’s credit rate for borrowing money in the long run.
Additionally, the FY 2021 budget completely eliminates the city’s recycling program, which Sistrunk said does not turn a profit and only has about 10-percent participation citywide. Curbside recycling pickup ended in March with the purpose of keeping sanitation workers safe from COVID-19, and participants have had the option of dropping off their recyclable materials at the sanitation building on North Washington Street.
Other financial changes
The board voted 5-2, with Carver and Little opposed, to raise water and sewer rates in order to fund infrastructure replacements in several neighborhoods.
The water and sewer base rate will increase from $4 to $4.50 for usage of each after Oct. 1, with a variable rate of $4.15 per 1,000 gallons, Starkville Utilities general manager Terry Kemp said. The current variable rate, which represents the amount charged for every 1,000 gallons of both water and sewer use, is $3.25.
Most customers would see their water and sewer bills increase by $2 to $5, according to Kemp, and the city would see an annual revenue of $7.5 million.
The city’s initial rate increase in September 2018 began raising the money required to replace aging water and sewage pipes in Pleasant Acres, Green Oaks and Rolling Hills, the neighborhoods Kemp said generated the highest volume of calls for repair work in 2018.
The $1 million Pleasant Acres project is recently finished, several months later than originally planned, and the city is starting the $2.4 million Rolling Hills project.
The aldermen also voted unanimously, via the consent agenda, to end the hiring freeze implemented in March as a cost-saving measure to mitigate the impact of the sales tax revenue shortfall. The hiring freeze is the last of the cost-saving measures, which also included furloughing 47 employees and cutting department heads’ pay, to be eliminated.
Tess Vrbin was previously a reporter for The Dispatch.
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