Cary’s Town Council will consider a property-tax rate above what the town manager has proposed.

The agreement to look at a rate above 33 cents per $100 of valuation for the 2009 fiscal year came at a work session Tuesday.

Council members expressed interest in evening out the tax rate at a higher figure for the next three years. The council held off discussing a specific rate until it learns of the implications of eliminating two road projects.

A handout provided as the meeting started shows the tax implications of covering Cary’s increasing debt expense and maintaining four months of cash reserves. To meet those obligations, tax rates would start at 33 cents in 2009, go to 37.98 cents in 2011, 41.03 cents in 2013 and up to 43.84 cents in 2020.

“I think it’s the elephant in the room and I think we ought to just deal with it,” said council member Gale Adcock.

The council has agreed to limit debt service to 15 percent of expenditures. Fifteen percent is a threshold that bond-rating agencies look at when evaluating municipalities. Cary currently has the highest bond ratings from the three major agencies. The high ratings allow the town to pay lower interest on the debt it sells, which reduces the cost of using debt to finance bricks-and-mortar projects.

Staff also provided a flowchart showing two approaches to capital funding. The first approach is that projects determine funding; the second is that funding determines projects.

“I think that we have a responsibility to say … that funding determines projects,” said council member Erv Portman. The discussion about the tax rate followed a review of road and park projects proposed for the 2009 fiscal year, which starts July 1.

The council removed downtown road projects, the widening of Chapel Hill Road and the extension of South Harrison Avenue. Removing those two projects is expected to save the town about $10.5 million next year and additional money in future years.

The proposed 33-cent tax rate is “revenue neutral.” 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 when adjusted for municipal growth. The current tax is 42 cents per $100 of valuation.

Some semantics also crept into the conversation. Adcock said that the idea of going above “revenue-neutral” is not an increase because the rate would still be lower than Cary residents currently pay.

“We’re not raising the tax rate, we’re lowering it less,” Adcock said.

Portman disagreed. Any rate above revenue-neutral “is in fact a tax increase,” Portman said.

Town Manager Bill Coleman recommended that the council not plan farther out than three years with any tax-rate adjustments.

The handout, Coleman said, includes a variety of complex assumptions about the town’s future financial situation.

“The assumptions can change significantly” over two or three years, Coleman said.