DELMAR — Town Comptroller Michael Cohen prefaced his presentation on Bethlehem’s tentative budget for next year with visions of fire and brimstone, only to promise that’s not what the community is going to see in next year’s tax bill.
The Town forecasts a $48.3 million spending plan for next year, a 3.1 percent increase from last year’s adopted budget. However, Cohen said, this will translate into a “relatively modest” 1.8 percent increase in residents’ tax bills. A proposed 3.3 percent decrease within the Town’s General Fund helps factor into the more modest increase.
According to the comptroller, a resident with a home assessed at the average value of $261,000 will see a $19.10 increase in their respective tax bill next year.
“That said, and despite my concerns, this actually isn’t a bad news budget presentation. I believe that our fiscal policies and conservative approach to both budgeting and spending has served us well,” Cohen said.
His concerns are more over the global economy, where pundits are mixed over what traditional indicators may warn. Some of whom believe that the economy is heading into another recession.
The current rate of inflation in the United States is 8.26 percent for the 12 months ending on Aug. 31 — down from 8.52 percent in July. Earlier in the year, the nation was experiencing a rate not observed in 40 years. To combat that, the Federal Reserve began a series of incremental increases to its prime rate.
From a high-level view, an increase to the prime rate influences a wide range of interest rates; from the rate in which you earn interest by keeping money in your savings account, to the interest added to any debt accrued on your credit card. The higher the rate, the less likely people will be willing to spend. That’s why economists generally believe that a high-interest rate will curb spending, bring prices on consumer goods down, and rid worries of more inflation.
The Federal Reserve has hiked the prime rate up five times this year, and anticipates doing it two more times before the year is out. Where the rate of inflation appears to be going down, fixed rates for a 30-year mortgage have reached heights not seen since 2001.
Cohen noted that the Consumer Price Index has increased by 3.3 percent each year since 2016. Within that same time, Ton expenditure growth has increased only 2.7 percent. Because the Town has not relied upon borrowing to fund projects, instead building up its General Fund through a spending budget stretched out over several years, he expressed concern over costs like fuel and energy — for the 2023 budget, those comprise almost 50 percent of the budget change.
Collected sales tax will also be a concern. The current 30-year fixed mortgage on average is 6.86 percent, more than triple the rate from a year ago. Cohen said that could mean fewer people moving into homes here in Bethlehem, as would-be homeowners can’t afford what they once could.