Citing inflation in costs and increased competition in the job market, Statesboro City Manager Charles W. Penny has proposed a 5% across-the-board raise for the city government’s employees and a 2-mill increase in its property tax rate.

Increases in sewer rates, solid waste collection and disposal fees and natural gas base rates are also anticipated in the fiscal year 2024 budget assumptions Penny and City Finance Director Cindy West delivered to the mayor and council during a Tuesday, May 9, work session. The city’s fiscal years run July through June, and a public hearing is slated for June 6 so the council can adopt the budget June 20 to take effect July 1.

“Our most important resource is our employees, and so what we’re recommending to you is a 5 percent, across-the-board pay plan adjustment,” Penny said early in his presentation.

The raise is needed because of inflation, he said, and the percentage comes recommended by the human resources consulting firm Condrey & Associates. The firm led by Stephen E. Condrey completed the city’s previous compensation plan study in 2019, and Penny proposes to have the firm do a new study during fiscal year 2024, to be put into effect July 1 2025, to sort out the pay levels for different jobs and experience levels.

“I’m not … crazy about across-the-board adjustments, and I like pay-for-performance, but if we were only doing pay-for-performance and not doing across-the-board adjustments, our salaries would be falling way behind and we would have a real challenge in being able to keep our people,” Penny told the council.

The compensation study is expected to cost $55,000. The 5% across-the-board raise will cost $915,000 for fiscal 2024, while continuing the city’s pay-for-performance program for a third year will cost $540,000, according to city staff projections.

When the 5% raise for all employees is added, employees awarded performance raises at the “outstanding” performance level could see their salaries increase a total of 9%, Penny noted.

“Nine percent is a lot,” Councilman Phil Boyum  commented.  “It doesn’t go down tomorrow. It only stays up.”

Penny noted that not all employees will get a 9% increase.

Costs and spending

Expenditures in the general fund – the part of the city budget supplied in part by property tax – are proposed to rise from $20.6 million in fiscal 2023 to almost $22.3 million in fiscal  2024.

Meanwhile, West projects, total spending for all funds of the city budget – disregarding transfers between the funds – will increase from $73.25 million in the current fiscal year to $91.4 million in the fiscal 2024 budget. Besides the general fund, this overall budget includes user fee-funded enterprise services such as water and sewer, natural gas and waste collection and disposal, as we as special-purpose funds supplied by local sales taxes, the hotel-motel tax and federal grants.

The staff’s budget assumptions include 10% growth in property taxes from new construction and rising property values, adjusted down from a preliminary suggestion of 17% from the county Board of Tax Assessors’ office. The 10% growth would yield an estimated $607,830.

Proposed tax hike

But the increase of 2 mills in the tax rate that Penny recommended is calculated to yield around $1,829,000 additional revenue.

Last year he also suggested, but the council did not adopt, a millage rate increase. Instead, the city took advantage of growth in its tax digest, including inflation in property values. But the city government still, as Penny had predicted, spent more than it took in as new revenue to the general fund, reducing its fund balance by roughly $600,000.

The city could again balance its budget – including the raises – without a tax increase, Penny said. But he added that this would further erode the fund balance, which he has called a “rainy day fund,” by an estimated $1.34 million.

“We can do it, but we’re setting ourselves up for further decline in that, and that’s our emergency fund,” Penny said in a phone interview Thursday. “It’s one thing to balance the budget with the intentions of not using (a budgeted fund balance draw-down), and the first three years that I was here, that was what we were doing.”

In other words, for several years he and West showed the budget as balanced with projected fund balance draw-downs that never actually occurred. Instead, department heads were asked to trim expenses and not rehire for many vacancies – public safety jobs being exempted from a conditional hiring freeze two years ago – and did so.

“But with the cost of living, with all this inflation, last year we spent $600,000 of that fund balance, and that’s a non-recurring fund, and so our fund balance went from about 54% of our general fund down to 46%, and so that’s headed in the wrong  direction, and salaries are not going down,” Penny said.

A regional industrial boom centered on Hyundai Motor Group’s electric vehicle Meta Plant America, now under construction, is expected to increase competition for employees. Meanwhile, Penny noted, recent bids on a number of city projects have come in significantly over-budget.

Millage in context

As in previous years, the budget presentation slides included a bar chart showing Statesboro’s current city property tax rate, 7.308 mills, “in the middle of the pack” of rates levied by a selection of Georgia cities, some nearby such as Metter, some comparable to Statesboro in size such as Hinesville, and others major players such as Augusta, Savannah and Atlanta.

The chart also indicated that Statesboro’s city rate is lower than the Bulloch County Board of Commissioners’ 11.35-mill rate and the Board of Education’s 8.263 mills.

Another point in the presentation, often made before, is that Statesboro, as a university town, contains an unusually large amount of tax-exempt property. According to Penny, almost 25% by value of the appraised property in Statesboro is exempt from tax.  This includes schools, churches and government buildings, as well as the university.

One mill in the city now generates around $900,000, he noted, while the county government and school board each collect approximately $2.5 million per mill on their countywide tax base.

A mill is 1/1000th of the assessed value of property, and most property in Georgia is assessed for taxes at 40% of market value. An increase of 2 mills, from the current 7.308 mills to 9.308, would be a $156 tax increase on a $200,000 home with a $2,000 homestead exemption. On that example, provided in the city’s presentation, the tax is now $570.02 and would rise to $726.02.

The Statesboro Herald had a reporter present for the first hour of Tuesday’s presentation, but not for the later discussion. Mayor Jonathan McCollar and all five council members attended.

Council concern

No votes were taken during the work session, but council members appeared to agree that increases in the tax and some fees will be needed, Councilwoman Shari Barr, the mayor pro tempore, said when phoned Thursday.

“In my understanding, the consensus when we left was that, yes, we are going to need to go up, but there was concern expressed by me and others that we realize people are hurting,” Barr said. “We’ve got a lot of folks on fixed incomes. We’ve got a lot of low-income people. … So there’s a concern about people for whom it’s going to be a struggle.”

So the mayor and council talked about ways to mitigate the effect on those residents, including possibly expanding a city program to assist people in financial distress with their utility bills.