PORTERDALE -- The City Council agreed Monday night to borrow $100,000 in anticipation of property tax receipts in order to pay the town's bills through December.
The council approved an ordinance authorizing the mayor to enter into an agreement with BB&T to borrow $100,000 at 3.09 percent interest. The Tax Anticipation Note is required by state law to be repaid by the end of the year.
The city currently has about $53,000 in outstanding balances to vendors. With property taxes not yet billed, the town will use the TAN funds to bridge the gap until taxes are collected.
City Manager Bob Thomson said $100,000 was determined to be the amount needed based on the city's outstanding debts and the money needed to carry it through until tax dollars start coming in.
"We're not projecting a deficit in the budget," Thomson said, "It's a cash flow issue."
The council voted 4-1 to authorize Mayor Bobby Hamby to sign the agreement with BB&T.
Councilwoman Linda Finger voted in opposition.
"It's impossible for one to borrow their way out of debt," she said, adding that she is concerned that the city will have to continue to borrow in the future.
The council also approved the first and second readings of the fiscal year 2010 millage rate ordinance. The ordinance will increase the town's property tax millage from 9.156 mills to 17.518. The council was scheduled to vote on the millage increase at a called meeting Tuesday night.
City officials say the millage increase is needed to help close a revenue gap of $110,000 and compensate for a decrease in property values.
The proposed millage increase is made up of the rollback rate, which is 13.518, plus another 4-mill increase. The rollback rate is the millage that would be needed to generate the same amount of tax revenue as the previous year.
At 17.518 mills, the tax increase for an average Porterdale residential property would be approximately $41 to $75 per year, according to city officials.
At a public hearing prior to Monday night's council meeting, several residents questioned the need for the millage rate increase.
Sara Sanders said she has lived in Porterdale for 47 years and has more in her house now than it is worth. She asked why she should have to pay more taxes now when she can't sell her house for what it is worth.
Mayor Hamby told those present that the council worked long and hard to find ways to balance the budget without increasing taxes or cutting services to the core. However, because property tax assessments decreased this year, a greater millage rate is needed to collect the amount of taxes needed to run the town.
"This year, even though we have trimmed as much as we possibly can, we're still going to come up short (without a tax increase)," Hamby said.
Homeowners were reminded that the General Assembly approved a homestead exemption of $10,000 for residential properties that are owner-occupied in Porterdale in the last legislative session. The issue will go before Porterdale voters in a referendum held in conjunction with the General Election in November. If approved, Porterdale homeowners can apply for the exemption in 2011.