Nags Head proposes 22-cent tax rate in recommended $31 million budget

Town staff presented a recommended fiscal-year budget and a proposed 22-cent per $100 assessed-value tax rate at a meeting where they outlined how a recent county revaluation and rising insurance and construction costs are reshaping the town's finances.

The presenter said the county revaluation raised assessed values by roughly 59 percent and that the revenue-neutral rate would be about 20.84 cents per $100 assessed value. "What we are going to recommend in this budget is 22 cents per $100 assessed value," the presenter said, a 1.13-cent increase above the revenue-neutral rate that the town estimates will generate about $566,000 in additional revenue.

Why it matters: the revaluation changed the value of each penny of tax revenue (the presenter said a penny is now worth about $500,000, up from roughly $315,000 before revaluation), and the town is adjusting rates and district levies rather than relying on previous shared-revenue surpluses.

Key budget drivers and recommended changes: the presenter identified four main pressures — revaluation, shifts in shared revenues, a dissolution of a municipal health-benefits trust, and inflation. The presenter said the municipal health-benefits trust informed members in March it was dissolving, and, combined with a high 2024 claim, the town expects roughly $440,000 in increased health-insurance costs. To respond, the town recommends joining a new multi-employer self-insured pool in which the town would be a voting board member.

The budget also addresses beach-nourishment funding through Municipal Service Districts (MSDs). Staff recommended rounding long-standing MSD rates to 9 cents per $100 assessed value for MSDs 1 and 2 and noted that a recent study showed one northern area does not require nourishment, so staff recommended removing that study levy for that area.

Capital and operating highlights: staff described a capital investment fund used to smooth multi-year projects and said inflation has raised project costs dramatically (a recent bathhouse was cited at $860,000; a modern sanitation truck is now about $400,000). The general fund is projected at about $31 million, which staff said is roughly $9 million less than the prior year largely because some large grant receipts and reserve transfers are not repeating. Staff reported more than $6 million in active grant-funded projects; examples included about $300,000 in beach-nourishment planning and a $4 million Land and Water Conservation Fund grant to place conservation on roughly 250 acres behind Max Woods Fresh Pond.

Utilities and fees: the presenter said the water budget is about $4.9 million (an increase of about $55,000) and recommended a 5 percent rate increase to account for operating-cost inflation, with a planned rate-structure review in FY2027. An advisory committee recommendation to raise the pump-out credit from $150 to $250 was also included in the recommended budget.

Questions from commissioners focused on revenue strategies and priorities. One commissioner asked about legislative requests and potential funding for a waterline project; the presenter said the town has submitted appropriation requests and is pursuing grants. Commissioners also discussed prioritizing housing for ocean-rescue staff and whether the town should seek expanded authority from the legislature to provide housing.

Next steps: staff said the board will hold a budget workshop on May 21 and a public hearing on June 11; the recommended budget and an explanatory brief will be posted on the town website.

(At the meeting, staff thanked multiple team members for their work preparing the recommendation.)