Joel Burgess

jburgess@citizen-times.com

ASHEVILLE - Fast-rising real estate prices and local political decisions are expected to drive up property tax bills this year.

Still, it's tough to say how high tax bills will climb — or even whether bills for some homeowners will decrease.

That's because some things are known about the formula used for figuring taxes - and some things aren't. There are two near-certainties. The first is that city property values went up an average of 29 percent since the last time the government assessed them in 2013. The second is taxes will be needed to start making payments on $74 million in voter-approved bond borrowing.

The unknowns are tax rates, which are set by the city and Buncombe County and combined for Asheville property bills.

While local officials have just begun the debate over tax rates for the fiscal year beginning July 1, there are ways to forecast where they're going. One estimate by the Citizen-Times shows a home valued at $200,000 in 2016 should expect at least $250 in additional property taxes.

Bills could inch up even more depending on a City Council debate over public transit funding.

Mayor Esther Manheimer said she's not personally "shut the door" on additional funding for programs such as energy-efficiency initiatives or buses but is also concerned about tax bills.

"I've heard real concerns from people about affordability," Manheimer said.

How tax bills get hashed out

The annual tax bill for city property owners is actually a combination of tax bills.

Those are a county tax, a city tax, and in most cases, an Asheville City Schools tax.

The city rate is set by the council. The Board of Commissioners sets the county rate. Commissioners also set the schools rate after getting a recommendation from the school board.

The two elected bodies vote on those rates before the start of each fiscal year.

For most city property owners, those three rates are added together. For those outside the city schools district, only city and county rates are used. A property's value is divided by 100 then multiplied by the combined rates.

For example, a $100,000 Asheville home in the city schools district had a combined tax rate of $1.23 in 2016 and a bill of $1,230. A city home outside the schools district had a $1.08 rate with the owner owing $1,080.

Normally rates stay the same or go up. This year, they're expected to drop.

But that doesn't mean bills will also drop.

That's because of new county-assigned property values, something that happens about every four years. This year, those values jumped in an eye-popping way.

In the slowest-growing part of the city, South Asheville, property values rose a combined 17 percent, according to the county tax office. Meanwhile, in downtown there was a 44 percent increase in the value of land, homes and other buildings.

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What's 'revenue neutral'?

State law says government bodies have to take special steps during the confusing time when new property values are assigned.

Each body has to decide on a "revenue neutral" tax rate. That is the rate that would bring in the same amount of tax revenue as the prior year despite the change in property values. Some extra tax money is allowed for new buildings.

Property values go up during most re-assessment years, so revenue neutral tax rates would go down. During the recession, property values dropped, meaning revenue neutral rates rose.

Property taxes make up most of the $161 million city budget. This year's taxes are expected to reach nearly $56 million. Next year's revenue neutral rate would bring in $57 million.

Asheville finance officials calculated the revenue neutral rate at 39.5 cents, down from 47.5 cents.

That's a half-cent higher than 39 cents calculated by the Citizen-Times using the most recent county property values and information from the state treasurer's office.

City CFO Barbara Whitehorn acknowledged the city calculation was likely an overestimate. The extra $735,000 is meant to pad the budget while property owners are appealing their assessments, she said. When property owners win appeals, it decreases property values.

Whitehorn said she will adjust after the appeals, possibly dropping the rate.

"I would much rather apologize for overestimating," she said.

While the law requires local governments to calculate revenue neutral, they aren't required to use the rate. City officials have already said they won't.

Paying off the bond

Extra taxes will be needed to pay for bond borrowing for transportation, affordable housing and parks.

The bonds were overwhelmingly approved by voters in November. Annual payments should total $4.8 million, though that could change depending on economic conditions, Whitehorn said.

Every cent on the city tax rate is expected to bring in nearly $1.5 million. City finance officials have estimated it will take 3.5 cents over the revenue neutral rate to cover bond payments.

That's lower than the nearly 4.2 cents officials had predicted as late as October before they knew the scope of property value increases.

County, schools tax rates

In terms of county and schools tax rates, there are bigger question marks.

The county's revenue neutral rate would be 51 cents, almost 9 cents lower than the current 60.4 cents per $100 of assessed value.

But goals named by Board of Commissioners Chairman Brownie Newman could mean raising the rate to boost the county budget, which last year exceeded $400 million.

"I would like to achieve a revenue neutral budget," Newman said. "But I also want to make sure we invest to achieve other key goals, including support for our teachers, expanded pre-K, addressing the opioid crisis and investing in community clean energy."

Schools revenue neutral rate would be 11.5 cents, down from 15 cents. But the school board has yet to meet and talk about potential changes, city schools spokesman Charlie Glazener said Monday.

Public transit debate

Meanwhile, a debate is forming on the council about whether to increase the rate by an additional 1 cent to boost the bus system.

Transit is popular among all council members, but some are saying it might be more important to ease taxes.

It's not clear whether there's a majority of seven council members to back the transit increase. Four members have expressed varying degrees of support.

This year's nearly $6.9 million bus system budget gets most of its money from property taxes and federal and state grants, though federal funding is being reduced.

Councilman Cecil Bothwell said the extra cent would add $30 on a $300,000 home's annual bill, "which seems like a nominal change."

"Getting people out of their cars is the most significant way the city government can cut community carbon emissions, and a better bus system is the best way for the city to make life more affordable for our citizens," Bothwell said.

Councilman Brian Haynes also backed the increase. The two said the $1.5 million should go toward increasing night and weekend hours.

"I would very much like to see us extend the bus route hours to 10 p.m. and extend Sunday services," Haynes said.

Councilwoman Julie Mayfield said "before committing to a certain amount" she wants to hear if the bus system could ramp up fast enough use new money.

"I am comfortable with an increase to support significant expansion, but we don't know yet how much that would be," Mayfield said.

Councilman Keith Young didn't respond to requests for comment. Young has voiced strong support for transit but has also said he is interested in tax relief.

Vice Mayor Gwen Wisler said she hasn't decided and wants to hear all presentations and take a "deep dive'" into the budget first.

Manheimer and Councilman Gordon Smith leaned away from the increase, saying they were inclined to cover the bond payments and no more.

"While I remain open to considering funding additional community needs such as expanded transit, I am sensitive to holding the line on taxes," the mayor said.

Smith said he was "very cautious" because of talk by President Donald Trump and the GOP-controlled Congress of cutting taxes and services.

"Citizens of Asheville are feeling the effects of a long-term Republican strategy to shift the cost of government away from the wealthiest people and corporations and onto the backs of regular, working people," he said.

Bottom line for tax bills

Although budget discussions are still in process, it's likely tax bills will go up for most city property owners. Rates are expected to be at least revenue neutral with the city adding 3.5 cents on top of that for the bonds. Another 1 cent is being discussed for buses. The county's and schools' rates could climb higher as budgets take shape.

That means the new combined tax rates should be at least $1.05 per $100 of assessed value.

Applying that to a home valued at $200,000 in 2016 and an average value increase of 29 percent, the home's combined tax bill would be higher by $249.

A tax cut, meanwhile, would be possible for properties whose values grew at slower rates — around 15 percent or lower. Those tax cuts would happen as long as the local governments stick close to revenue neutral rates.

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Current tax rates

$1.23 per $100 of assessed value (county, city and city schools combined)

Paid by owners of land, homes and other buildings in Asheville.

Buncombe County: 60.4 cents

Asheville: 47.5 cents

Asheville City Schools: 15 cents (Only owners of properties in the city schools district pay this tax.)

NOTE: Rates are rounded to nearest half cent.

2017 tax rates? (lowest likely)

$1.05 per $100 of assessed value (County, city and city schools combined)

Lowest likely combined tax rates for city property owner. Rates are "revenue neutral" based on information from Buncombe County Tax Department and North Carolina Treasurer's Office.

Buncombe County: 51 cents - This might rise to fund "key goals," according to commissioners Chairman Brownie Newman.

Asheville: 42.5 cents (39 cents + 3.5 cents) - Revenue neutral plus bond payments. City has calculated revenue neutral at 39.5 cents, but latest data shows it will likely be lower. Some City Council members want to add another 1 cent for public transit.

Asheville City Schools: 11.5 cents School officials have not said yet if they will use revenue neutral rate.

What it could mean for tax bills

Some examples of tax increases for Asheville property owners.

2016 examples are based on county, city and schools rates combined. 2017 examples are based on the lowest likely version of those three rates or $1.05. 2017 bills use a 29 percent growth in value, the city average. Some properties saw higher percentage rises in value. Others saw lower. A smaller increase could mean a tax bill decrease.

To calculate your lowest likely 2017 tax bill, divide your property's tax value by $100 then multiply it by $1.05. To find your tax value go to buncombetax.org/Search.aspx

2016 - $150,000 home, business or land : $1,845 combined property tax bill

2017 - $193,500 (same property with 29 percent growth) : $2,032 combined property tax bill

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2016 - $200,000 home, business or land : $2,460 combined property tax bill

2017 - $258,000 (same property with 29 percent growth) : $2,709 combined property tax bill

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2016 $500,000 home, business or land : $6,150 combined property tax bill

2017 $645,000 (same property with 29 percent growth) : $6,773 combined property tax bill

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2016 $1 million home, business or land : $12,300 combined property tax bill