What's all the chatter about? | Eastern NC Now

     Last Monday the City Council had a presentation from our annual auditor. She had a tidy presentation that showed the city’s general fund balance increased, our debt doubled, our expenses were substantially lower and our revenues were substantially higher than budgeted. All in all, this was a great report and a reason for a sigh of relief. While it is demonstrably good news, it also opened up some questions.

      Most pressingly, why was the city so anxiously awaiting this audit?

      Nine months ago, the City Council announced a large 28% property tax increase. This move woke up the slumbering electorate. Why does the city need so much additional revenue, we all asked? No answers were forthcoming. Personally, I met with the city manager and the mayor and asked this question. They could not provide answers that made sense. I did my own digging and saw that the debt had quadrupled over the last few years. I met with the city manager again and asked him about this and he assured me that the debt was not a contributing factor to the tax hike; that the city had enough cash in the bank to pay off the debt entirely if we wanted. While he was saying that the mayor publicly announced that the city didn’t have any debt at all. This mixed message concerned me.

      I decided to run for office with the express purpose of repealing the tax. The citizens did not ask for it and were not asked to approve it. The finances of the city seemed shrouded in mystery, and if what the city manager said was true, there simply was no need for the tax hike.

      The first thing I did after being elected was pay a visit to the finance director and inquire about how much money we had in the bank. She couldn’t tell me. Our system wasn’t capable of giving such a simple number. I asked if we had enough to pay off our debt. She said we absolutely did not. I asked how much we had to put towards debt, if she had to give a ballpark number. She said maybe a million or two. When would we know, I implored incredulously? She said we wouldn’t know for sure until the audit came back. When will that be?

                “The audit typically comes back in September or October, but this year due to illnesses in the office, we won’t have those numbers back until sometime next year,” she said.

                For me, these were my worst fears coming true. The taxes were raised and I had promised to cut them, believing that the finances were in reasonably good shape. The city manager raised taxes, then jumped ship when he was challenged as to the necessity of the move. Now, we as a community wouldn’t know the true financial shape of the city for months. I had several frustrated exchanges with the finance director. It seemed preposterous to me that our financial software couldn’t give me regular, concise reports about our financial conditions. Why does our city only get a single snapshot of our financial health once a year when an outside auditor gives it to us?

                City Counilmen do not have more access to financial information than anyone else. Like the entire city, I held my breath waiting for results. When I first read the audit report, I was relieved. We had money in the bank. Not enough to pay off the debt, not by a long shot, but we had more than a million or two. The unanswered question still remains. The auditor does not adjust any numbers. They simply verify. The audit was ‘good’ because the auditor found no errors. Why did we have to wait for the auditor to report our own numbers to us? Why can’t our finance office give us these numbers weekly if we want them?

                Perhaps most importantly, the audit is showing our financial information for last year; for July 2024- Jun 2025. If the numbers look this good, why did the city manager decide to raise taxes on us?

                The answer is that there is no good answer. (If you want this explanation, see the endnote).

                After reviewing the audit, there was only one clear path. We immediately repealed last year’s tax hike. We reduced taxes to where they were last year.  “We” meaning the three new councilmen. The incumbents prefer superfluous higher taxes. (This decision cannot be official until budget season, but we gave proper guidance to all department heads since they are currently in the process of formulating their budgets).

                This was a very interesting year for the city of Washington. It’s the first time in recorded history that the city has three conservatives on the council, and the Democrats in town don’t like it. They spend a great deal of time stirring up dust. I hear daily of some new hyperbolic social media frenzy or some misinformed, liberal-leaning Washington Daily News articles.

Since being elected, the new council has made exactly two official decisions. One to elect an interim city manager. This was done in a public vote with a 3-2 decision. City managers and interims are chosen expressly and only by the city council. Councils are not limited to who they can chose and they are not obliged to follow any special protocol in selecting this executive position. A name was put forward, a vote was taken, and an interim was selected.

                The second decision was to delegate the economic development authority into an assistant city manager position. This had been done by the previous administration, but they created the position specifically for Stacey Drakeford, and they eliminated the position upon his retirement. We were merely re-authorizing the position at a substantially lower pay grade.

                Those were the only two official actions. We did give guidance and indications of future actions. We gave guidance to the staff that we intended to lower the property tax rate to last year’s levels, so all budgets should be made accordingly.  In an effort to improve transparency, we requested that all departments and committees begin recording all meetings and posting those videos and minutes publicly online as well as publicly posting all contracts that each department has engaged into and the competing contracts that were bypassed. Lastly, we requested that the Utilities Advisory Board put together a presentation on the pros and cons of making Washington Utilities an independent commission. We believe there may be benefits to adding a degree of political separation into Washington Utilities and we’d like the input from those most in the know.

                After three months, we’ve made two official decisions and indicated that we’re exploring a few others. All the rest is dust and anxiety stirred up by those who like to stay stirred up. If it hasn’t officially come before the council, it is only chatter.

                So far, the newly elected have upheld their promise to cut taxes and the incumbents have upheld their promise to do nothing.

ENDNOTE:

Why did the city manager decide to raise taxes on us?

When a government makes a budget, they anticipate all of their expenses. They itemize every possible expenditure for the entire year. If someone is eligible to retire halfway through the year, they still must anticipate that the person might stay for all twelve months and they must be prepared to pay them for all twelve months. Likewise, they guesstimate all revenues for the year, and to be prudent, they guesstimate slightly lower than what they believe is realistic. The audit revealed that our expenses were in fact 12% lower than what we had budgeted and our income was 12% higher. This is a very cautious budget. On the one hand, this is great, but on the other, it is a very inaccurate budget. Our final numbers were 24% off, even though they were 24% better than anticipated. (We brought in $2 million more than budgeted and we spent $2.5 million less than budgeted.)

At first glance, 24% better than budgeted seems categorically positive. But why was it so far off? One of the reasons revealed is because our budget anticipated that we’d have 300 employees on payroll. All 300 must be funded for the entire year. However, there were several of those positions that are ‘frozen’. That means we must fund them by law, but we have no intention of actually hiring and filling them. This becomes problematic because when we budget for these positions with our conservative estimates on income and our inflated estimates for expenses it appears we won’t have enough money to pay for all of our stated expenses. In reality, we know that we won’t spend that much because we don’t intend to hire several of those positions, but by leaving them on the books, we must fund them. Therefore, a paper need for money arises. A choice had to be made. We could remove the ‘frozen’ positions from the budget and attempt to have a more accurate budget or we could raise taxes. There was no real need to raise taxes, certainly not substantially, but there was a paper need. I believe they should have attempted a more accurate budget rather than raise taxes.

This brings up another, longer topic. How should we handle property taxes in a reevaluation year where property values are evaluated 50% higher than the year before? We’ll save that for another article.