ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Thursday, April 3, 1997 TAG: 9704030002
SECTION: VIRGINIA PAGE: C-1 EDITION: METRO
SOURCE: DAN CASEY THE ROANOKE TIMES
As the new fiscal year approaches, City Council appears split over what to do about taxes.
Roanoke City Council is grappling with questions that could affect the pocketbooks of every city taxpayer beginning July 1.
Should the city leave its real estate tax rate unchanged - effectively increasing taxes for homeowners? Should council cut that rate and enact other taxes to replace lost revenue? Should it cut city spending? If so, where?
At council's meeting Monday afternoon, taxpayers will get the clearest hints yet of what those answers may be:
Council will schedule a hearing - probably for May 5 - for public comment on what the real estate rate should be beginning July 1. The current rate is $1.23 per $100 of assessed value. Leaving it unchanged amounts to a property tax increase, because assessments on homes and businesses have risen. Council last cut the tax, by 2 cents, in 1994.
If new taxes, tax increases or other changes are on the table, council will schedule another public hearing on them for the same date. Some that have been talked about include taxes on cellular telephone service and cable television, and ending tax credit for agriculturally zoned land.
Later this month, the city administration will propose its fiscal 1998 budget. With no changes in the tax structure, it would amount to more than $158million. That would cover most of the new programs the city administration has identified as "priorities," but the city still would be $2million short of being able to give workers a 3 percent cost-of-living raise.
And in mid-May, council will enact that budget, complete with tax cuts, tax increases, new taxes or cuts in programs, if any.
Interviews and public statements over the past few weeks suggest that council is widely split on which way to go. Budget deliberations already have verged on testy.
The public also has exerted pressure: Retirees on fixed incomes are demanding a real estate tax cut. On the other side are parents of schoolchildren, who fear tax cuts would threaten education and new school construction.
Councilman Carroll Swain, who first proposed cutting real estate taxes by as much as 10 cents over the next five years, says he doesn't think he can persuade a majority of council to vote for more than a 2-cent cut. Swain admitted he may have to settle for less.
"The general feeling is that, psychologically, the public is due something back. ... It's going to be 2 cents or maybe even 1. I don't know [which]," Swain said.
To the real estate taxpayer, that doesn't translate into much. It wouldn't even erase the tax increase they'll be paying this year as a result of rising assessments, which show an average increase of about 3 percent.
For example, the average assessed value of a Roanoke home is $67,518. For that homeowner, each penny cut from the rate would equal $6.75 less they would pay in real estate taxes during the next fiscal year, which begins July 1.
But when you begin adding up all those small sums, it translates into big money.
Each penny cut also would equal $354,000 less the city would collect in taxes. Under a revenue-sharing formula, that would mean $225,073 less to the city's general fund and $128,927 less to schools.
Swain and Councilmen Nelson Harris and Jim Trout say school advocates don't need to worry.
"The city's not going to lose something," Swain said. "It's going to be some kind of a switch. Some [kind of tax] in the consumption area."
"There won't be any significant loss in revenue, because probably we'll find another source," Trout said.
Harris said he would support a cut in the real estate rate only if the lost revenue could be made up with some other kind of tax.
But Vice Mayor Linda Wyatt calls trading one tax for another the worst kind of politics. Actions like that have created a "credibility gap" between the general public and their elected representatives, she said.
"The average citizen doesn't save any bucks, and they feel like they've had a number run on them," Wyatt said. "They turn around and say, 'So what did I gain from this game you've run on me?' They feel like they've been lied to."
If tax increases remain on the table, there also is likely to be pressure from the businesses they would affect, and perhaps from the customers those businesses would pass the tax along to.
Cox Communications of Roanoke, which provides cable television to city residents, has already written Mayor David Bowers objecting to a utility tax on cable. Providers of cellular phone service probably aren't far behind.
"We don't feel the cable customer should have to bear the cost of a reduction in the real estate rate," said Gretchen Shine, Cox general manager. "It would cost about $2 per customer per month. We don't think our customers would see the value of that tax."
On March8, Bowers appeared willing to consider a couple of new levies on utilities, particularly one on cell phones, which already is collected by Roanoke County. But by this week, he seemed primed to provide for a small real estate tax cut without replacing the revenue with a new tax.
"The issue doesn't necessarily rise or fall on whether a tax reduction becomes a revenue-neutral equation," Bowers said. "The premise that I don't see anyone [raising] is whether there should be any cut in our government."
If a penny off the tax rate equals $354,000 in lost revenue, "you're talking about less than three-tenths of 1 percent of the revenue to this city," Bowers said. "My question is, 'Why are we wasting our time worrying about that?' That is not a disaster; that is not a catastrophe."
Trout agrees, and adds that he would look for new tax to replace lost revenue only if the real estate rate cut is more than a penny.
But Wyatt believes it would be significant, considering that requests for services and capital improvements have been growing.
"$354,000 is three and a half stoplights we need," she said. "That's a lot of curb and guttering that has been requested. We have millions of dollars of unfunded capital improvement needs. What [a 1-cent cut] will save the average citizen is $6 a year."
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