FY2021 Budget

minimize the impact on property owners from increased taxes related to higher property value assessments. Property values do not change uniformly across town by location or by property type. As a result, the net financial impact to a property owner is due to both the change in value and tax rate. For property owners who experienced a decrease, or smaller increase in value, the related tax burden also decreases. Town of Morrisville property owners benefit from one of the lowest tax rates and costs for service in Wake County. The tax rate for the Town of Morrisville has not been changed since the last revaluation cycle in FY 2017 when it was adjusted to the RNTR plus one-half cent to be allocated to the Roadway and Transportation Reserve. As a result, only natural growth capacity was realized through revenue streams – no additional capacity was captured to support the growth in development and services in an expanding residential and commercial customer base. The Town has historically (in almost thirty-years) not increased taxes other than to support bond debt for voter approved capital projects in 2012 and 2014. The Town has demonstrated its commitment to living within available resources for operations and management. However, the changing dynamics and expectations of our Town Council for strategic goals and priorities, future capital project investments and formative policy consideration demonstrates an unsustainable approach to achieving future opportunities and aspirations of the Town. Growth in the tax base, combined with a reasonable increase in the tax rate, provides a path to fulfill some unmet needs. As the town approaches build-out of remaining available land, the average growth rate in our tax base values annually as experienced in the last two revaluation cycles will likely decline in the future. Growth in tax base is primarily driven annually by new development and changing market conditions during revaluation cycles. Total revenues are reflective collectively of the increased assessed property value from the natural growth in tax base (ad valorem) and revenues in other categories. Other revenues more directly impacted by COVID-19 such as sales tax, program fees, Powell Bill funds and interest earnings are discussed separately. Real revenue growth (from sources other than transfers and carryover items) approximates 1.5% as compared to the prior year. Typical assumptions for natural growth annually are between 3%-4% in a more positive economic climate. Staff continues to monitor the state and local economic conditions from stay-at-home orders during the current State of Emergency that could cause changes up or down in forecast revenues, and the related effects on our residents and businesses. Two additional balanced budget tax rate scenarios, illustrating a lower property tax rate with reduced levels of program and operational support have been evaluated and will be available for discussion as part of planned budget discussions. Adjustments to the tax rate associated with a future bond referendum may also be layered onto the current proposed budget as those discussions continue. The General Fund Ad Valorem revenue for FY 2021 is estimated at $22,475,000 10 and represents 59% of the total budget. This estimate is based on a 99.0% collection rate. This collection rate has been lowered from 99.8% to account for potential COVID-19 related payment delays.

10 At budget adoption the proposed tax rate was reduced from 36.5 cents to 36 cents adjusting projected Ad Valorem revenues to $22,175,000.

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