An amount less than a single cent in Cary’s proposed property-tax rate has the Town Council weighing millions of dollars in decisions.

The council met for its first budget work session Tuesday. Town Manager Bill Coleman presented his proposed $306 million budget to the council for the 2009 fiscal year, which starts July 1, last week.

The proposed budget calls for a property-tax rate of 33 cents per $100 of valuation. For a Cary house valued at $300,000 the corresponding town property-tax bill would be $990. That “revenue neutral” rate takes into account Wake County’s property-tax revaluation that became effective Jan. 1. The revaluation was the first since 2000.

A “revenue neutral” tax rate is one that raises the same amount of money following a revaluation as before. Since Cary’s revalued tax base as of Jan. 1 rose to $19.1 billion from $13.8 billion, a corresponding drop in the tax rate is necessary to generate the same amount of revenue in 2009 as 2008. The current tax rate is 42 cents per $100 of valuation.

Trying to more precisely define revenue neutral and determine whether 33 cents is the best estimate of that concept occupied the council for most of the session.

Council member Jack Smith said he has heard from residents saying that at 33 cents, because the value of their homes increased in the revaluation, the proposed tax rate will have them paying more in taxes than the current fiscal year when their homes had lower tax values but the tax rate was 42 cents.

“What I argue with is saying revenue neutral with a straight face,” Smith said.

Property tax comprises by far the largest portion of the town’s revenue stream and is the budget component over which Cary has the most control.

North Carolina law requires the town to state a revenue-neutral property-tax rate in years immediately following a revaluation. Statutes also provide a methodology for determining that rate, which includes the calculation of a growth factor since the last revaluation. Town officials used local data that they believe more accurately reflects Cary’s growth in calculating the rate. As a result, the rate the town calculated is 32.38 cents. The rate using the state’s approach is 31.79 cents. The town has traditionally rounded its tax rate to an event cent.

Budget Director Scott Fogleman said the rounding up to 33 cents was not only to stick with tradition but also acknowledged “economic uncertainty” that could cut into sales tax and other revenue sources.

Each cent of the property-tax rate generates about $1.9 million in revenue for the town.

Fogleman also explained that about 15 percent of the tax base is vehicles and equipment, which are not subject to revaluation and depreciate each year.

The new tax rate also needs to cover that depreciation, Fogleman said.

“It’s town revenue neutral,” Mayor Harold Weinbrecht said of the proposed tax rate. “It’s not individual revenue neutral.”

Even with the explanation, Smith said that impact of the proposed tax rate “seems to be hundreds and hundreds of dollars” on consituents he has talked with.

Council member Erv Portman said that “32 cents is probably the real revenue neutral number.”

Portman requested that the council receive more data on the rounding and property-tax collections from staff before settling on the tax rate.

Gale Adcock said that rounding up lets the council “hedge our bets” on sales tax and other revenues.

“It gives us a little cushion on things that may happen that we have no control over,” Adcock said.

Though agreeing that the proposed tax rate should be scrutinized, council member Jennifer Robinson said, “I have trouble revisiting the base rate when I think there has been huge due diligence.”