ROCKINGHAM — The City of Rockingham’s proposed budget for fiscal year 2020-2021 includes spending cuts and and a tax increase to accommodate both the economic shutdown caused by the COVID-19 pandemic and the anticipated losses in sales tax revenue resulting from the Richmond County Board of Commissioners’ decision to change its sales tax distribution method from per capita to ad valorem.

City Manager Monty Crump on Wednesday presented the municipality’s proposed budget to the City Council. It includes a $0.10 increase to Rockingham’s property tax rate which, if approved, would be the first time the city has had to raise taxes in 21 years, a feat which Crump said was possible because the city has “lived within our means.” Crump said that this was the most “responsible” way to address the hole in the budget that will have implications long into the future.

“If you wait a year (to raise taxes) the hole gets deeper. If you wait three years, the hole is three times deeper,” Crump said. “You get further and further and further and it takes two, three, four times the amount of revenue to replace that hole if you don’t fix it the first year and the only way to do that is with a property tax increase.”

A $0.10 tax rate increase means that a person with a $100,000 home would pay $100 more in taxes, a person with a $150,000 home would pay $150 more in taxes, and a person with a $200,000 home would pay $200 more in taxes.

In his budget message, Crump called the tax increase the result of a “gun to the head, worst time and worst-case situation for the citizens of Rockingham.” He added that the city is raising taxes unlike the county commissioners who he said “passed the buck” by forcing all the municipalities to raise taxes by switching to ad valorem rather than raise their own property taxes.

Mayor Pro Tem John Hutchinson took exception with the suggestion from the county that the municipalities dip into their fund balance to cover their losses, which he said is only a temporary solution that only means that the municipalities would have to not only raise taxes in the future, but also raise their fund balance somehow.

“That’s part of what the county did to itself to get into the bad trouble that it’s in now,” Hutchinson said, adding that raising taxes is the responsible way to handle this rather than following the county’s advice.

The city is operating based on an estimated $750,000 to $800,000 hit to sales tax revenues per year from the change in sales tax distribution method alone. Crump based this figure on “baseline data” from the last five years of sales tax revenues. This would mean a $3.75 million to $4 million loss to the city over the next five years.

“That staggering amount of revenue loss to Rockingham would quickly drain Rockingham fund balance reserves without either a revenue increase of substantial and unsustainable cuts to city services and quality of life for the citizens of our community,” Crump wrote.

Crump explained that in 2019-2020, 33% of the city’s budget was generated by property tax revenue and 23% was generated by sales tax. This coming year, with the reduction in sales tax revenue, property taxes will have to shoulder more of the burden and will make up 40% of the budget. Sales tax revenues will drop to an estimated 16% of the city’s total budget.

The hits the city expects to sustain from COVID-19 were covered in cuts of $1,144,500 in capital outlay in the General Fund, Crump said.

Council members react

After reviewing the proposed budget, Council members again expressed their disappointment in the lack of communication and honesty in regard to the change to ad valorem between the County Commissioners and the municipalities

“We’re dealing with folks who won’t explain themselves, and won’t make any comment. And it’s difficult to get a handle on exactly where they’re coming from, other than they’re broke…,” Crump said

Councilman Eugene Willard had similar thoughts.

“It’s a shame that they have taken the municipalities and the county of Richmond and done this to them,” Willard said. “There’s no reason for it. I doubt you’d have another county that has done that to their municipalities. I would really like to know some of the counties that have done something like that, especially with no explanation or nothing.”

When he first brought the sales tax method change to a vote, County Manager Bryan Land said the change was necessary because the county had inherited several expenses from the municipalities in recent years. One of the expenses he mentioned was the eight new salaries the county took on from the new 9-1-1 Center that consolidated emergency dispatch services offered by both Rockingham and Hamlet. That move allowed the cities to eliminate four dispatcher positions each.

Rockingham Mayor Steve Morris noted on Wednesday that the contract the cities signed with the county stated that every Rockingham emergency dispatcher would lose their job when the new 9-1-1 Center opened, and those employees would need to reapply for the jobs if they were interested. If they were re-hired they’d become employees of the county, not the city. The county had no obligation to hire those employees, Morris said.

“They could hire people off the street,” Morris said. “It’s just not true that we said, ‘Here, you’ve got to take these people to start with.’”

Crump brought up the fiscal projections Land had presented before the vote on ad valorem was taken. Those estimates, which showed that the county’s sales tax revenue would increase by $675,000 under ad valorem, were much lower than estimates provided by the Department of Revenue (DOR), which showed that the county’s intake would increase by $1,840,000.

The DOR’s estimates also showed that the municipalities would lose much more sales tax revenue than Land had projected. He also mentioned Land’s statement before the commissioners’ vote in April that the State Treasurer’s Office recommended this change, which was refuted by an official in charge of the division that was working with the county on the issue.

“I wouldn’t have my job if I told you a lie like that,” Crump told the Council.

“Which lie?” Morris quipped.

A public hearing on the proposed budget will be held during the regular City Council meeting on June 9.

Reach Gavin Stone at [email protected]. Reach Brandon Tester at [email protected].