Wendell News Outlet

Give counties funding options for growth‏

From: Karen Rindge, WakeUP Wake County (info@wakeupwakecounty.com)
Sent: Fri 11/21/08 4:31 PM

Between state budget shortfalls and the economic crisis, funding for infrastructure needs -- like schools, water and transit -- will need to be more creative. WakeUP Wake County has long advocated for more local options to help pay for growth's needs. Meg Gray, policy analyst at the NC Budget & Tax Center, explains this well in her op-ed printed Nov. 19 in the News&Observer.... read on:
Give Counties More Taxing Options

North Carolina's counties are under the gun. Fast-growing areas are struggling to build schools as construction costs escalate. Water and sewer systems in rural counties have reached a dangerous point of disrepair.

At the same time, state lawmakers are increasingly transferring to local governments the responsibility for road maintenance and construction -- costs the state has traditionally paid. And counties are trying to meet growing demand for public transportation.

This is happening as the souring economy has increased needs and decreased revenue. But counties' hands are tied, because the legislature has failed to provide them with a slate of options for raising the revenue needed in a way that works for their communities.

Moreover, in 2007 the state began requiring county officials to hold referendums on new sales taxes and real estate transfer taxes.

On Nov. 4, 16 counties held tax referendums, and all failed. Overall, 23 counties have held referendums on the real estate transfer tax; all have failed. In the 50 counties that held public votes on sales taxes, only eight have passed.

DURHAM MAYOR BILL BELL RECENTLY SUGGESTED that the state should give counties permission to levy an additional tax to support public transportation without using the referendum process. In his words, "At some point, when issues are big enough and important enough, elected officials ought to be trusted to carry [them] out."

He is absolutely right -- local leaders need a slate of revenue options they can implement without using the referendum process.

They, after all, are the community's elected representatives and should have the power to make taxation and investment decisions -- for which their constituents will hold them accountable. If each county had a variety of tax options, it could customize a system that would generate adequate revenue to meet needs and be fair in distributing the responsibility for paying taxes.

For example, a local income tax would be relatively stable during these tough times. Plus, income taxes are fairer than sales taxes, because they require wealthier residents to pay more, while low-income families may not have to pay the income tax at all.

This may be a good option for rural counties that don't want to increase property taxes for fear of how that would affect farm owners, and that don't want to increase the sales tax because it would hurt low-income families.

Or, what if counties had a way to tax road use to help pay for construction and maintenance?

A vehicle utility fee would enable local governments to tax property owners and renters based on how much traffic their properties generate.

Homes generate a little; shopping malls a lot. Such a system would use the same data civil engineers now collect to monitor traffic patterns, so getting it up and running wouldn't be overly complicated. Then, counties would have a dedicated source for roads and public transit.

THEN THERE'S THE MUCH-MALIGNED REAL ESTATE TRANSFER FEE, which can be a smart option for fast-growing counties. In recent elections, county leaders were at a tremendous disadvantage when it came to selling the idea to voters. While opponents (in particular, the N.C. Realtors Association and the N.C. Homebuilders Association) were free to raise and spend unlimited money, run ads and send out mailings, county leaders were allowed only limited engagement in their support for the referendums.

Ads portending the downfall of the local housing market and personal financial Armageddon were ubiquitous. Leaders tried to make their case in the news and at community meetings, but they were often drowned out.

The vast majority of voters in these elections heard only one side of the story -- and it was a side that didn't feel compelled to stick to the facts. The referendum process cannot work when one side is at such a tremendous disadvantage. It also robs county leaders of the ability to do their jobs.

A more sensible plan would be to allow county leaders to create a tax structure they believe works for their community, and then let voters hold them accountable for how they choose to raise and spend the money.

By giving counties a slate of tax options, county leaders could make better decisions and better serve their constituents. And all of our counties could better manage the new responsibilities they face.

It's time for the state to untie the hands of local elected officials and let them make revenue and spending decisions.

Meg Gray is a public policy analyst at the N.C. Budget & Tax Center, a private organization in Raleigh.