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Letter to the Editor: Cornelius tax increases ‘baked into the cake’

OPINION. By Dave Gilroy. I’ve been looking closely at Cornelius town budgets since the late 1990’s fiscal years. It’s the reason why I ran for town board for the first time in 2003 – concern about fast growth in government spending. My first campaign signs back then read “Control Spending” in big blue letters. I served for 14 years on the Cornelius Town Board and voted against four major tax increases during that time:

—17% in FY 2007

—12% in FY 2012 (Embedded in Property Revaluation)

—11% in FY 2017

GILROY, AS A PRIVATE CITIZEN, SPEAKS AT A TOWN MEETING

—13% in FY 2020 (Embedded in Property Revaluation)

Many people are now asking how I view the FY 2021 Cornelius Town Budget which was approved last week. In short, it reflects some earnest work by town officials, but is still plagued by the same long term, fundamental challenge – local government spending continues to grow way faster than our lovely town is growing. The result is what you see above – a major tax increase every 3-5 years in Cornelius.

It’s structurally inevitable. All of us who live here can expect to see this pattern repeated, and you can count on writing a bigger and bigger check to finance local government as sure as the sun rises every morning. You may live in the same house, with the same job (or no job during downturns like the current one), but your local government will unfortunately require more and more money from your family as time goes on.

You may ask, “why is this?”

Before any details, let me just say how truly difficult the challenge is. Our current town commissioners have all the best intentions. Each of them works very hard, asks a lot of questions, and does their level best in working with our town manager and staff during the annual budget process which ended last Thursday.

This year, for example, I think they did solid work on about a quarter of the town budget, specifically Operating expenses.

In a newsletter about a year ago, I listed several reasons why controlling the growth of government spending is so seemingly impossible. Here they are again below. Each year I witness another dynamic to add, so we now have a TOP 10 list:

—Traditional agency problem – decision makers spending other people’s money

—Compensation and benefit levels going up fast in good economic times, and still going up (never adjusting down) during recessions. This is made worse by neighboring towns doing “bench-marking studies” every two years, then leapfrogging each other to be higher than a constantly increasing “average”. And benefits levels in the public sector exceed what’s available in the private sector but are ignored in the analysis

—Government officials building ever expanding departmental enterprises

—A general view among many that in a town like Cornelius, everyone is wealthy enough and happy to pay more

—”Public Safety” – two words many people equate with “Blank Check” rather than “Reasonable Growth”

—Town Hall rooms filled with 75 friends, family and advocates for special interests while 33,000 taxpayers are at home living their lives

—A mindset that “enough is never enough”. Even “fantastic is never enough”. For example, after 16 years of awesome professional leadership and huge financial investment in buildings, technology, vehicles, and equipment, Cornelius may very well have better Police and Fire organizations than any town in America. Yet, the pressure is on in every annual budget cycle for major increases in spending to get larger and even more perfect

—Special interest advocates whipping up a firestorm in social media for more spending beneficial to their close friends

—Ability to hide tax increases by “embedding” them in property revaluations, so your tax bill goes up, even while the town’s tax rate goes down.

This year, we saw a new factor – #10 – “Feel good” communications.

Slide #15 of our Town Manager’s budget presentation this year was entitled “$1.2M Reductions to Help Offset COVID Revenue Impacts.”

To most people, this title naturally suggests that we will reduce spending from current levels. Nope – the first bullet point is a good example: “Merit (reduced from 4 to 3%).” This means that a significant part of the $1.2 million “reduction” in spending is really a 3% overall increase in town employee compensation. We just call it a “reduction” because the town would prefer to increase employee pay by a higher 4% for this coming year.

Many citizens called this pay raise “tone deaf” given the COVID crisis with several thousand Cornelius citizens now out of work and depending on government assistance programs to survive. Note that 3% is double the SSI Cost of Living Adjustment for 2020.

I presented three simple slides at town hall public comments last week. The first showed that over the last decade overall Cornelius town spending grew 3.9% per year compounded vs. our town population growing 2.7% per year and the real value of town property growing 1.5% per year. The difference may not sound like much, but the magic of compounding means that over many years, each Cornelius family must bear a much larger share of town costs.

Unfortunately, the just-approved FY 2021 Budget is far worse.

Town spending growth is about 6.5 times higher than population and real property growth in our town this coming year (see chart).

Recurring expenses (not counting Capital investments which vary a lot from year to year) will grow about 4 times faster than our town itself. For example, we are growing our town’s total Personnel costs 7.6% this coming year, even when we are expecting $1.8 million less revenue (sales tax, property tax, tourism fees) due to the COVID crisis.

So, over time, we can see why tax increases in Cornelius are “baked into the cake” – we can expect another one within a couple years (probably timed with the next property Reval). You’ll hear public officials celebrate Cornelius’s low tax rate vs. other Mecklenburg County towns, but for families, it’s not the rate that counts, it’s the increasing tax bill itself. Cornelius has 70 miles of lakefront coast-line with highly valuable real estate, so it would be shameful for us not to have a comparatively low rate vs. high-cost Davidson, for example.

Finally, there is one more major problem that means enormous pressure to increase taxes in Cornelius – our failure to invest our long-term cash reserves appropriately. Right now, we have $25.5 million in cash reserves as a town, saved up to meet long-term capital spending needs, but nearly 99% of this Fund Balance is sitting in cash or cash-equivalent accounts earning a near zero return year after year after year…

—Dave Gilroy

Gilroy, the founder of Scale Finance, was a Cornelius Town Commissioner from 2005 to 2019. He says he plans to run again in 2021. He can be reached agilroy@scalefinance.com

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