Galax City Council’s new budget, which took effect July 1, contains a 8-cent increase in the real estate tax.
The 8.7% increase was proposed as a way to generate more revenue versus dipping into the city’s already-existing fund balance, which is used for emergencies.
As of the June 13 council meeting, the budget — even after several cuts — had a spending deficit in the neighborhood of $300,000. At a June 27 special called meeting, council approved the higher tax rate and budget by split votes, with some members opposing the rate hike.
Several citizens spoke at a public hearing on June 27, saying the tax rate increase would be a hardship on many at a time when they are already dealing with rising costs of gas and food due to inflation. City officials pointed out that Galax is dealing with those same higher costs.
Judy Taylor-Gallimore — finance director and, at the time of the meeting, interim city manager — said real estate tax rates were proposed to increase from 92¢ to $1 per $100 assessed value, which is an 8.7% increase. Other tax rates would remain the same: personal property at $2.25 per $100 and machinery and tools at $l.60 per $100.
Citizens Oppose Increase
Melissa Peddy was first to speak at the hearing, and said she was there on behalf of people she knows in the community who would not be able to afford the tax increase
“It comes at a time when food costs are rising, people are flocking to the soup kitchen to get meals and groceries on a regular basis,” she said. “This is a time when everyone is strapped by inflation, and I know the city is, as well.”
Peddy pointed out the number of people the city helps pay their taxes because they aren’t able to. “I’d really, really encourge you to consider the people we have in the community who cannot afford this increase — and that’s the vast majority, I believe. I hope you do take into account how this can affect people’s financial health and their mental health.”
Sarah Marion said she is a retired senior citizen who tries to live off her Social Security every month, “but this year hasn’t been easy.”
She told council that the tax increase is coming at a hard time for many people like her. “It seems to me there was an increase of some sort two or three years ago — and here we are again.”
Jane Ward said didn’t know about the proposed rate increase until noon that day, and encouraged the city to better publicize issues that affect citizens.
She remarked about the cars lined up on Lafayette Street to pick up food from God’s Storehouse soup kitchen, and asked countcil to take those people into consideration.
“Incomes are not going up,” Sylvia Richardson told council. “I feel that it’s a hardship for most people — working people and low income, as well as retired people… It would be nice if there were more consideration for people’s income, especially when you have more going out than you have coming in — even if you’ve planned for it. I think a tax increase is detrimental to people’s financial, emotional and mental health.”
Jana Pobrislo said she could probably afford to pay higher taxes, “but I associate with a lot of people who can’t; who are struggling right now terribly because of inflation,” especially rising food costs.
She suggested that the tax increase “be phased in more gradually… a slower increase for people.”
Real estate owners will not be the only ones affected by the higher rate — those who rent will not be immune, noted Helen Kyle, who owns several rental properties in the city. Landlords will have raise rents on their tenants to make up for the cost, she said. “Not only is my personal real estate tax going up, but I’m also going to have to pass that cost on to other citizens.”
She worried that higher tax rates would discourage people from building or offering housing. “I hear all the time that there’s a shortage of low-income housing, and housing period,” she said. “If you go up on real estate taxes like that, people like me that rent real estate are going to have to go up on their prices, which affects other people in the community.”
Curtis Cox encouraged council to enact personal property tax relief for owners of older vehicles, which would help people afford the higher real estate taxes.
Commissioner of Revenue David Hankley also spoke, urging council to offer personal property tax relief due to the rising values of vehicles.
With the car tax rate the same as last year, the city stands to take in much more revenue. Hankley suggested lowering the rate and passing along the savings to taxpayers in the form of a refund, as a way to offset the rising real estate tax rate.
With no additional speakers, council then addressed the citizens.
Council Member Travis Haynes explained some of the reasons for the tax increase. For example, Galax-Grayson EMS is losing staff to surrounding agencies and having trouble covering the shifts because of pay, which needs to be raised. The department is also faced with increased fuel costs for ambulances.
“I understand so much how this hurts at the end of the month,” Haynes said. “I also understand how many people depend on the services we do provide, and we’re doing our best to establish a balancing point between those.”
Council Member Mike Larrowe pointed out that citizens are experiencing the same inflated costs being incurred by the city — gas for trash trucks and police cruisers — as well as minimum wage increases and matching the rising pay for police officers in neighboring localities.
He said city council’s Audit and Finance Committee identified $75,000 in expense reductions, which were removed from the budget. Other items were deferred until later.
Larrowe said his primary concern was that if costs are going up by 8% due to inflation, and city revenue stays flat, it won’t work in the long term.
He said he appreciated the comments and pleas from citizens to not raise taxes, “but what we’re really being asked to do is the impossible — as a city, we can’t spend more than we take in. The only way to spend less is to cut services, which hurt those people in the lower incomes that need those services the worst.”
Council Member Martin Warr spoke from his perspective as a small business owner, explaining that some food costs have more than tripled over the last year. He said he is unable to pass all the costs on to customers.
The increase in minimum wage has affected the city just as it has at his restaurant. “That’s pretty tough to absorb. We’ve tried everything we can think of to get more money into their hands, also.”
He echoed Larrowe’s statement about the many hours council members spent going through the budget to find items to cut.
“Maybe we haven’t always kept up with tax increases the way that we should have,” Warr said, referring to a citizen’s suggestion about phasing in increases. “Maybe it should have been more gradual and not so much all at one time.”
Council Member Sharon Ritchie said city leades asked every department head what they could take out of their budgets, “and asked them to strip out anything they didn’t absolutely need to have.”
Raising taxes was not an easy decision for council, she said, but if the city doesn’t try to keep taxes in line with expenses, it will have a negative impact in the long run.
About the fund balance, Vice Mayor Beth White said it could be used to balance the budget, but it needs to be kept in place for unexpected issues that inevitably arise each year.
For example, a few years back the city had to cover the costs of an extraordinary number of foster child placements for the Department of Social Services — nearly $300,000 more than budgeted.
“We’re trying to plan for the unknown,” she said. “It’s vital to have that fund balance in place when emergencies arise. It weighs heavily on our minds, preparing for the things you can’t plan for.”
Greene, Henck Oppose Increase
Mayor Willie Greene said he did not agree with raising taxes now. He supported a previous tax increase, he said, “because there was a time the City of Galax did not charge enough taxes and we wound up in the hole… We had to borrow money to keep operating.”
Now, however, the mayor said raising taxes was too much of a hardship on citizens.
Greene called for a motion and Haynes moved to increase the real estate tax rate by 8.7% as publicized. Larrowe seconded the motion, and Greene asked for any discussion.
Ritchie asked for confirmation that the council would have an opportunity to revisit and possibly lower the tax rate closer to tax tickets being mailed out. Taylor-Gallimore confirmed the tax rate could be lowered, but not increased.
Council Member Evan Henck offered a proposal to cut spending in order to lower the tax increase to less than 3 cents instead of 8 cents.
“I don’t support deficit spending — at least not much; I can understand a small amount,” he began. “My thoughts on being fiscally responsible are to not spend more than we take in.”
He noted that each $45,000 spending cut or revenue increase in the budget equates to a 1-cent reduction in the tax increase.
First, Henck found a budget line item to increase revenue. He said the estimated meals tax revenue is about $50,000 short in the budget, and noted that the finance director is comfortable with increasing that estimate to better reflect what the city is likely to take in.
That was the first penny saved off the tax increase, he said.
“It is my understanding that, after approving their budget, the school division is prepared to return to the city $100,000 of funds they were able to find from other sources,” Henck said. “That is more than two pennies” off the proposed tax increase.
(This $100,000 was not in the city’s proposed budget.)
The Industrial Development Authority fund has $43,000, he continued. “There is no need to transfer a budgeted amount of $55,000. Let’s account for the money that is already sitting there,” he said. “That’s another penny” off the tax rate.
The $55,000 is for a downtown public restroom project, which Henck said should be paid for from the fund balance, not the general fund.
If council accepted these changes to the budget, Henck said the tax rate increase could be reduced to 2.5 cents. For a $200,000 home, he said 2.5 cents would result in a $50 annual increase.
Henck said he didn’t support the 8-cent tax rate increase, but had no qualms with increasing water rates because of the necessity for improvements at the city’s “decades-old, aging, going-to-fail-soon treatment plant,” which the additional revenue would pay for.
After this presentation, Henck made a motion to amend Haynes’ motion to recommend a 3-cent tax increase and accept the proposed budget amendments. The motion died due to lack of a second.
There was no discussion of Henck’s proposals and council moved on to other discussion.
Larrowe shared research he had conducted on how the city’s tax rates compare to other localities. Galax is in the middle — fourth of the seven cities in the southwest region. Even with increasing the real estate tax rate to $1 per $100, Galax will still be in the middle.
Greene asked for a vote on the motion to increase the real estate tax rate. The motion was passed with Haynes, Larrowe, Ritchie, Warr and White voting “yes” and Greene and Henck voting “no.”
After setting the tax rates, Greene asked for a motion to approve and adopt the fiscal year 2023 revised budget.
A public hearing on the budget was held at the May council meeting, but the advertised budget for that hearing did not include any tax increases. Council considered the fiscal year 2023 budget again at the June 13 meeting and recommended further changes be presented at the June 27 meeting.
The budget was revised to include the following changes from the original advertised budget:
General Fund Expenditure Changes
• Advertised: $24.9 million
• Various reductions identified by Audit & Finance Committee: -$76,195
• Reduction of animal control officer vehicle: -$35,000
• Total revised expenditures: $24.8 million
General Fund Revenue Changes
• Advertised: $24.9 million
• Add real estate property tax revenue: $328,993
• Add Rex Theater rent: $12,000
• Reduce Rex Theater revenue: -$2,500
• Reduce use of fund balance: -$449,688
• Total revised revenue: $24.8 million
Larrowe made a motion to approve and adopt the fiscal year 2023 budget as revised. Warr seconded the motion; Haynes, Henck, Larrowe, Ritchie, Warr and White voted “yes;” Greene voted “no.”
Council approved and adopted a revised General Fund budget of $24.8 million, a Utility Fund of $4.5 million and a Storm Water Fund of $607,500.