NEWS

At the May 26 Town Board Meeting, the Mayor, Town Board, and staff engaged in a frank discussion about the Town’s 2027 draft budget in light of a proposed Constitutional Amendment added to the November 3 General Election ballot by the North Carolina General Assembly.

The essence of the May 26 discussion was whether the town should consider increasing Davidson property taxes by one or two cents as part of the 2027 budget. A one or two cent property tax increase would be a late addition to the proposed fiscal year 2027 budget, presented in May of this year.

Town Manager Jamie Justice originally proposed a budget that would keep the property tax rate constant at 26.6 cents per $100 of property value. The full, 128-page, FY2027 Draft Budget Book can be found here.

However, there is now concern that if the Constitutional Amendment passes in November, towns like Davidson could face significant limitations to their ability to raise property taxes in future years to fund critical local services.

If the November ballot measure passes, the proposed line that would be added to the North Carolina Constitution directs the General Assembly to enact laws that limit the ability of towns and cities to raise property taxes. The ballot measure includes the following directive: “The General Assembly shall enact general laws limiting the amount by which the levy of taxes on property may increase, which may include exceptions." The potential change to the state constitution was summarized in this article. There is no detail in the ballot language to provide guidance to voters or local governments as to how much or in what manner the General Assembly will choose to limit property tax increases. Property taxes are typically a reliable and stable funding source for municipalities. In North Carolina, they are the largest single source of revenue to pay for services such as fire, police, and public works.

In response to this uncertainty, the conversation among Davidson’s elected officials shifted to the potential need to raise the tax rate now to mitigate the potential impact of the change in future budgeting cycles.

For that reason, Justice updated the 2027 budget presentation to include details of what an increase to the property tax rate would look like, and the impact on residents. The briefing presented at the meeting can be found here. The details describing the impact of a one cent increase are on slide 27, and a two-cent increase are on slide 28.

A one cent change would increase taxes on a home valued at $658,840 (the median value in Davidson) by $5.49 a month, for an annual increase of $65.88. A two-cent increase would cost the average homeowner an additional $10.98 a month, or $131.76 annually.

One after another, Town Commissioners expressed concern over the potential impacts of the change, especially highlighting the concerns over the projected construction of the new Fire Station One. Mayor Knox also noted that the Town has the ability to provide financial assistance to town residents who qualify to offset their tax burdens.

The Town provided the following statement outlining the concerns:

“Due to concerns of the NC General Assembly’s law for a constitutional amendment on the ballot for this November that limits local property tax levies in an unidentified and unspecified method that would severely hinder Town of Davidson funding for critical local services such as police, fire, and public works, House Bill 1089 / SL 2026-5 (2025-2026 Session) - North Carolina General Assembly, the Board of Commissioners discussed the potential for increasing the recommended tax rate for additional revenue towards funding the proposed Fire Station #1 in FY 2027 rather than FY 2028 as originally planned. The budget will be discussed at the June 9 meeting, and information will be included in the agenda.”

The 1-page bill proposes to rewrite Subsection (5) of Section 2 of Article V of the North Carolina Constitution to read “Property tax purposes, limitation. The General Assembly shall not authorize any county, city, or town, special district, or other unit of local government to levy taxes on property, except for purposes authorized by general law uniformly applicable throughout the State, unless the tax is approved by a majority of the qualified voters of the unit who vote thereon. The General Assembly shall enact general laws limiting the amount by which the levy of taxes on property may increase, which may include exceptions.”

It further calls for the following language to be placed on the November 3 General Election ballot: “[  ] FOR   [ ] AGAINST Constitutional amendment requiring limits on property tax increases by local governments.”

A Deeper Dive into the Town’s Budgeting Process

It requires some significant study of the intricate process involved in constructing local government budgets to better understand how the N.C. General Assembly’s proposed change to the state constitution could fundamentally alter how the Town is able to generate needed revenue.

By statute, every municipality in North Carolina is required to develop and approve a balanced budget before the start of the new fiscal year which begins on July 1 of each year. To that end, Town staff assesses the various revenue sources and develops a proposed budget, setting the Town property tax rate to raise the needed funds.

The Town of Davidson's budgeting process typically runs from December through the following June as reflected on a diagram in the FY2027 Draft Budget Book. The key milestones are identified as:

• 2025: Position Requests
• 2026: Capital Improvement Needs and Fee Schedules
• 2026: Department Budgets
• March 2026: Department Budgets, Revenue, and Priorities
• April 2026: Budget Workshops
• May 2026: Budget Completion
• June 2026: Adoption

Having completed the previous steps, the public hearing for the FY2027 Budget was held on May 2026. Only one member of the community made comments at that public hearing.

The Bottom Line

The proposed budget is $26,665,097. Spending is subdivided into the following broad categories and breaks out in the following:

• General Fund:                        $22,053,474
• Powell Bill Fund:                         $550,000
• PAVE Act Fund:                        $3,125,000
• Stormwater Fund:                        $433,975
• Affordable Housing Fund:            $502,648

Estimated revenues available in the General Fund are as follows:

• Property taxes:                                      $11,770,925
• Sales Tax revenue:                                  $4,205,875
• Prepared foods and occupancy taxes:       $630,000
• Utility franchise taxes:                              $1,095,000
• Motor vehicle taxes & fees:                      $1,062,725
• Charges for services:                                  $619,600
• Intergovernmental:                                      $892,038
• Interest on investments:                              $700,000
• Miscellaneous:                                             $146,500
• Fund balance appropriated:                         $930,811

The significant worry voiced by the Town’s elected officials at the May 26 meeting is that if the Constitutional Amendment passes in November, the Town of Davidson would lose control over the revenue source that currently accounts for 53.37% of its budget.

Moreover, the change will not only impact the Town, but also the county. Davidson residents rely on Mecklenburg County for a number of support services including water and sewer, public health, social and community services, building code, and parks and recreation. The cumulative effect of legislative limits to the revenue-raising ability of both Davidson and Mecklenburg County could be paralyzing.

The timing of these unknown implications of the potential change to the state constitution is further complicated because property values in Mecklenburg County will be reevaluated in 2027. The county conducts property reevaluations every four years, and the 2027 reevaluation is the second on the four-year schedule. Prior to 2019, the county was on an eight-year cycle. The cycle was shortened to four years in an effort to more accurately reflect property values and to mitigate what had become staggering increases over the eight-year cycle. The results of the 2027 reevaluation will be used to calculate the fiscal year 2028 budget. Property reevaluations reliably result in increased revenues for local governments, but those assumptions could be called into question if the General Assembly enacts legislation that curbs those increases.

What was initially expected to be a routine budget process for the town is now anything but routine. The Town Board is expected to vote on the FY27 budget at their June 9 meeting. Given the new uncertainties, the Board may have to make the difficult decision to increase property taxes in this budget to head off an even larger budget problem in fiscal year 2028 and beyond.

Editor's Note: Friday afternoon the Town published the agenda for the June 9 meeting, and it had the following important update:

• Please note: Following the presentation of the FY2027 Manager's Recommended Budget and Capital Improvement Plan, the Board of Commissioners plans to suspend the rules to allow for a public comment period on the FY2027 Budget. Persons wishing to address the Board of Commissioners will register on a sign-up sheet stationed by the meeting room door. Prior to beginning the public comment period, the Mayor will collect the sign-up sheet and recognize speakers in the order that they registered. Speakers will address the Board of Commissioners from the podium and special accommodations will be made for persons with a disability with appropriate advanced notice to the Town Clerk. Speakers will be asked to identify themselves for the record and shall be limited to a maximum time of three (3) minutes.

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