2020 Retreat Priorities – Source Of Funding

February 21, 2021

Dear Blowing Rock Homeowners

To understand the Town budget, you need to understand the sources available to the Town Council to fund the general operating budget. The devil is in the details!

Let’s look at the “Numbers”.

Funding Sources
Property Taxes – 63%
Consumer Sales taxes – 14%
User Taxes collected by NC – 6%
Tourism Occupancy Tax – 6%
Other – 11%
Property Taxes Base
Residential Home Owners- 85%
Commercial Property Owners – 15%
Downtown Property Owners (TC&CB) – 9%

Population Data
Census – 1,400 – 33%
Seasonal – 2,900 – 67%
Registered Voters – 1,250 – 29%

The W&S operating budget is funded separately from W&S fees – 80% residential and 20% commercial customers. The W&S budget is not part of this discussion.

The Town does a great job of preparing and documenting the budget. You can read the details on the Town’s website https://www.townofblowingrocknc.gov/residents/town-budget/fy-2019-2020-proposed-budget.

We used the FY19-20 Budget since the FY20-21 budget was significantly affected by the risks of reductions in revenue due to the pandemic. Actual results have positively exceeded the conservative estimates.

Funding sources that are available to the Town Council is less that the gross general operating budget because gross revenue includes funding that is not controlled by the Town Council . For FY19-20 the reduction was 17% of the gross operating budget – 47% of sales tax revenue returned to Watauga County by agreement, 67% of occupancy tax retained and controlled by the Tourism Development Authority to promote tourism, Caldwell County reimbursement the Town for Fire & Rescue services and fund balance reserves and debt proceeds counted as revenue. Our calculations reflect these reductions to match the economics to the decisions available to the Town Council.

The Town maintains a Fund Balance Reserve “Rainy-Day Fund” of at least 50% of the general operating budget. Excess funds above the target is used to supplement the general operating budget as needed. This factor positively affects our bond rating.

Property taxes provide 63% of the general operating budget available to the Town Council. Our property tax rate is $0.39 per $100 of our property tax valuation for FY21-20. One cent of property taxes produces $117K of revenue. Our average property valuation is over $900K because the calculation is based on census data. These factors positively affects our bond rating.

The Blowing Rock property tax base is approximately $1.1B – 85% residential property and 15% commercial property. As noted in our last posting, the Downtown (Town Center & Central Business District) tax base is relatively low compared to the total property tax base.

Sales taxes and occupancy taxes are paid by consumers not business owners. The Town relies heavily on homeowners to fund both the general operating and W&S budgets. Sales taxes are based on sales in the County, not the Town, and are allocated to the Town by the County based on an valorem formula reduced by an interlocal agreement. The Town does benefit from a 33% allocation of occupancy taxes to fund infrastructure investments related to tourism.

The challenge for the Town Council is to maintain a fair balance between cost of services to property owners versus tourists. The costs of supporting our tourists particularly in Downtown has been growing as have sales taxes and occupancy taxes, so we recommend that the Town Manager and Town Council objectively match tourism expenses to funding sources. The need for adequate and clean bathrooms, more frequent trash pick-ups, parking enforcement, event management, wayfinding, enhanced tourist park infrastructure to attract tourists and cross walks are examples of costs driven by the impact on the Town to attract and host tourists. The upcoming budget process using 2021 retreat priority to set up a Special Downtown Tax District are opportunities to address the fairness challenge and reset the decision framework.

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