TAKE 5: County manager talks taxes, revenue deficit
This week, we Take 5 with Lee County Manager John Crumpton about the county’s revenue shortfalls, property revaluation and other subjects. Crumpton, a native of Jacksonville, Fla., earned bachelor degrees from Indiana University and Georgia State University, as well as a master’s degree in business administration from UNC-Wilmington. He began his career in government in Elizabethtown before working for more than 10 years in the private sector in the solid waste industry. Crumpton became the county manager in Lee County five years ago after serving in a similar position in Scotland County. He and his wife have four children.
The county’s board of commissioners approved a resolution this week addressing the county’s revenue shortfalls. The resolution includes enacting a hiring freeze and canceling all capital purchases for the remainder of the year. What kind of shortfall are you anticipating, and are the moves compelled by the resolution pretty standard practice for other municipalities?
It seems like it has become standard practice over the last four to five years. The recession is still having an impact on local government revenues, especially in the smaller counties in North Carolina.
Our largest shortfall is in sales tax revenues. Most of the sales taxes we receive are distributed based on point of origin (Lee County). Last year, revenues picked up and started to trend back upward. Now, they are back down by 5 percent. This is not good news for our economy locally. We are also anticipating shortfalls in state-shared revenues. As the state deals with its own issues and the federal government reduces spending, both of these situations are starting to impact our revenues in a negative way. The service demands in DSS (Department of Social Services), Health and Senior Services are going up, but the revenues to support those programs are going down. Next year, our citizens will see reduced services due to the recent cutbacks.
Part of the charge given to you is to reduce spending as much as possible, but to keep the county’s operations intact. You’ve been in that position before. How do you and other managers (both in Lee County and elsewhere) typically go about fulfilling a task like that?
With only three months left in the fiscal year, it will be difficult to cut back expenses. Most of the third-party expenditures (Lee County Board of Education and Central Carolina Community College are the biggest) have already received most of their funding for the year. Therefore, all of the reductions will come from county government operations. Typically, most managers look at travel, capital and equipment purchases to reduce spending. That is where we are cutting, plus we are looking at programs that we can cut back on for the remainder of the year.
Stockton, Calif., became the largest city to file for bankruptcy last summer. Part of Stockton’s problem, of course, is its pension obligations, and California has plenty of fiscal issues (and other cities in dire financial straits). As a municipal administrator – albeit on the county, not city, level – what’s your take on these bankruptcies? And do you think we’ll ever see any of these in North Carolina?
I believe we are very fortunate in North Carolina to have the system of local government in place that we do. Giving the state treasurer oversight of all local government borrowing through the Local Government Commission keeps local governments from going too far into debt. In addition, the Local Government Commission reviews all audited financial statements each year and forces local governments to take corrective action so that situations like in California won’t happen here. If California had our system of local government and the oversight by an agency with the power of the Local Government Commission, there wouldn’t be any bankruptcies by local governments. As long as the General Assembly allows the Local Government Commission to function as they do, we will never see the type of situation that California has here in North Carolina.
The county is also dealing with reaction to the recently completed real property revaluation. A number of commercial property owners are up in arms about valuations that increased significantly – in some cases doubling or tripling. How do you see things going, in terms of the county board of adjustments’ upcoming work and tax bills being sent this summer?
We knew going into the revaluation that the commercial property values would be our most difficult issue to deal with.
Developing market price for commercial property is difficult, especially in a market where there have been bankruptcies and foreclosures. The perception is that those sales impacted by these events should affect the market. However, under the law, they cannot be used as market sales since they do not represent 50 percent of the sales in the market. The non-foreclosure sales have shown growth in the commercial values in the county, causing many commercial properties to go up in value. This is difficult for those businesses to understand when businesses next to them have closed and their own revenues are down.
It is a difficult situation for everyone, and the Board of Equalization and Review will have a difficult time determining true market value in the commercial areas. I expect a long process for them. (We expect tax bills to go out on time – in August.)
With the number of appeals and the publicity surrounding the revaluation, we expect everyone will know what their tax bill will be when it comes to them. It surely doesn’t mean that we expect people to be happy paying taxes, but at least they should be aware of their future liability. Hopefully, any tax rate decrease the commissioners approve will help with the tax bills.
The recent “Economic Summit” has spurred much discussion about how Lee County will address the need for jobs, as well as dissolving the Chamber and EDC into a single entity. The county has approved funding to help complete a strategic plan to formalize the creation of that entity. What are the pluses and minuses, as you see them, of that approach?
Having one agency responsible for business recruitment and retention is a great positive for the community. Consultants and businesses looking to locate in a community want to deal with one agency. Having a unified voice shows the prospective business that we have a plan on how to get them to locate here.
Unfortunately, structure alone won’t solve all the problems associated with business recruitment in the county. We need a unified and supportive community behind the effort. We need to develop a plan that a large majority of the community will support. We also need to develop a strong marketing plan for the community.
Finally, there needs to be strong public and private financial support for the joint organization. None of this is in place now, and until it is, the new structure will have similar problems that the old structure had. The brightest spot of the entire effort recently is the number of people who have committed themselves to making the new structure work. If that unified commitment stays in place, then the effort will succeed, and the community will see economic growth come back to Lee County.