County, town leaders dismayed with tax plan

Revenue loss could be cutting libraries, recreation
By Vicki Hyatt | Jun 18, 2013

As the N.C. General Assembly wrestles with the quickly changing issue  of tax reform, local leaders are concerned the outcome will simply shift the tax burden onto property owners.

The latest Senate plan, one city and county leaders say was passed without any consultation with those who must deal with the aftermath, is one that will eliminate a significant amount of local revenue and provide no other means to make it up. Those charged with approving city and county budgets will be faced with two choices — raising property taxes, which is their only controllable form of revenue — or cutting back on the services local residents have come to expect.

“Between doing away with the local foox tax and eliminating the sales tax rebate we get on items we purchase, the estimate is that we will lose around $1.5 million,” said Haywood County Commission Chairman Mark Swanger. “We cannot absorb that kind of a loss because there’s no fat left to trim.”

If the cuts go through, Swanger said the county property tax rate will need to increase by 2 cents on every $100 of value to break even, or commissioners will have to look at eliminating the services now being provided that aren’t mandatory under state law. Those services include things like recreation, the library or economic development.

“When you get beyond that, most of what we do is mandated,” Swanger said.

Towns will lose funds, too

Waynesville Mayor Gavin Brown estimated the proposal to eliminate the 2 percent local food tax and make town purchases ineligible for a sales tax rebate would mean a revenue loss about $450,000 annually. This is an amount equal to 4.31 cents on every $100 of property value within the town limits.

“The situation is so fluid that it is impossible to determine exactly where the town stands,” Brown wrote in an e-mail. “Another item fairly well established is the elimination of the business/privilege license tax.  We earned over $130,000 on that this fiscal year.  Most of these items fall into the General Fund category.  The bottom line as of 11:05 a.m. on June 14, 2013, it is not a pretty sight.”

Canton Town Manager Al Matthews said the Senate proposal could have significant impacts on all municipalities. In Canton, the 2014-15 fiscal year could see a $88,009 loss, and by 2018-19, it would  grow to $206,188.

“The impact would require a 7.6 percent tax increase or about a 4.40-cent increase per $100 valuation,” Mathews said. “As currently proposed, municipalities will be stuck with finding the revenues. This is a short-sighted attempt to implement what the General Assembly calls the Tax Simplification and Reduction Act. In reality it just shifts the burden for generating revenues and the bottom line is that the property owners will bear the burden.”

A chart put together by the N.C. League of Municipalities shows Clyde would lose more than $50,000 by fiscal year  2018-19, an amount that would require a property tax increase of 14.2 percent, or 6.09 cents for every $100 of value to recoup. Maggie Valley would lose $nearly 78,000 by the same year, something that would require a 4.4 percent property tax increase or 1.87 cents per $100 of value to recoup.

Senate, House plans differ

The N.C. Association of County Commissioners told its members the Senate tax reform measure tentatively passed on June 13 expands the sales tax base slightly by ending many exemptions to generate new revenues for counties. Still, the organization estimates a net loss of $82 million to North Carolina county governments if all components of the Senate’s tax reform plan are implemented by 2018.

The House plan also expands the sales tax base slightly to some services but leaves in place the county sales tax on food and the refund for counties from paying sales taxes. The House’s adopted version would net counties an additional $74 million in sales tax revenues when it is fully implemented in 2018, the organization calculated.

Swanger said if the Senate’s plan is ultimately adopted, legislators will be doing the very thing they repeatedly vowed not to do — balance their budget on the backs of cities and counties.

“The county was never contacted, never consulted, which I find disturbing considering the adverse impact it will have in our county” he said of the tax reform plans. “All they are doing is cutting state taxes and forcing counties to raise taxes to do it. They are calling it reform, but it’s just a shell game. This plan is an arbitrary reduction in county revenue that will cause us to reduce service or raise taxes.”

Legislators are expected to try to develop a tax reform plan while also finishing up the state budget prior to June 30.