Durham City Council decides to tap into reserve fund
Posted June 17, 2008 5:47 p.m. EDT
Updated June 17, 2008 9:08 p.m. EDT
Durham, N.C. — With high gas prices and economic uncertainty, many people are trying to save as much money as they can. However, the Durham City Council has decided to do just the opposite by dipping into its savings.
"It's a budget that is faced with economic constraints,” Durham Mayor Bill Bell said.
To accomplish some of its goals – including giving some city employees, like law enforcement, raises – the Durham City Council passed a 4-cent increase in the tax rate on Monday night.
The budget sets the tax rate at 54 cents per $100 of assessed value. The old tax rate of 61.8 cents per $100 was rolled back this year to 50 cents following a local property revaluation.
However, it is not the tax hike that has some folks upset.
"We made a pretty lousy business decision and I'm frankly embarrassed about it," Durham City Councilman Eugene Brown said.
In passing the budget, the City Council voted to dip into reserves.
"That's when you want to jack up your savings in times of uncertainty, which is what we face now,” Brown said.
Another point of concern over dipping into the reserve fund is the city's credit, which is a 'AAA' rating. The 'AAA' rating, the highest of its kind, allows cities to borrow money at low interest rates.
"In the long run, if we lose it (credit rating), this could cost us millions of dollars,” Brown said.
Which means the city could pay more for loans.
"I don't have that concern. If I had that concern, I certainly would not have suggested it,” Bell said.
Bell also argued that the city has tapped into the reserve fund before and not lost its high bond rating. However, Brown said the City Council needs to be more careful in times of economical uncertainty.
"Who knows what is going to happen with the various legals cases we have against us, particularly those concerning the (Duke) Lacrosse case,” Brown said.
Bell said the Duke Lacrosse case should not be a consideration in the city's budget.
Durham is among 19 cities with a 'AAA' bond rating nationwide. Other North Carolina cites with the distinction are Raleigh, Charlotte and Chapel Hill.