News: CJ Exclusives

Counties Using Schools To Justify Sales Tax Hikes

Bill in legislature could foil large counties' plans

It’s an election year and counties once again can’t resist the urge to put a quarter-cent sales tax hike on the November ballot, hoping to reap the rewards of millions in extra revenue, all with the consent of taxpayers.

Guilford, and possibly Wake and Rockingham, would join Bladen, Mecklenburg, Richmond, and Brunswick counties with “local option sales tax referendums” on the ballot. Each measure would hike the current tax rate by 0.25 percent.

But a bill in the General Assembly could quash Mecklenburg’s referendum and put a dent in Wake’s ability to join a regional transit plan.

Brunswick County voters rejected a tax hike measure on the May primary ballot, with only 40 percent backing it, but in Davidson County a rate increase passed by a 56-44 margin.

The saying goes “you don’t get what you don’t ask for,” but odds are taxpayers will say no. At least that’s been the pattern of sales tax referendums since 2007, according to a tally kept by the N.C. Board of County Commissioners.

In 2008, 34 counties placed the quarter-cent sales tax hike on the ballot. Three passed. Guilford was one of the counties that did not approve the tax hike. The Board of Commissioners put it on the ballot again in 2010, with the same result.

In 2012, eight counties — including Guilford’s neighbor Alamance County — placed quarter-cent sales tax hikes on the November. Of those, only two passed — in Edgecombe and Greene counties.

In 2013, two counties placed sales tax hikes on the off-year election ballot. Harnett County voters approved the measure, while Yadkin County voters rejected it.

The General Assembly may have gummed up the works for tax-hike supporters in the state’s two largest counties, Wake and Mecklenburg. The state Senate passed a bill capping local sales tax levies at 2.5 percent, which is Mecklenburg’s current rate. If the House — which passed a different version of the bill — goes along with the Senate’s version, and Gov. Pat McCrory signs the measure into law, Mecklenburg would have to cancel its sales tax referendum.

Meantime, in Wake County, commissioners have not decided whether to ask voters for a quarter-cent hike on top of the current 2 percent rate. Even if the commission puts the 0.25 percent raise on the November ballot, the tax cap bill could preclude Wake from joining Orange and Durham counties in creating a regional transit system, heavily reliant on fixed rail, because the county would have to impose a half-cent sales tax dedicated to transit to join the regional system.

The tax-cap measure is in a House-Senate conference committee. Like Wake, Guilford’s sales tax rate is 2 percent (the state rate is 4.75 percent), so the pending law would not affect Guilford’s quarter-cent sales tax referendum.

Local officials believe they have a new angle to persuade voters his time around, by claiming that revenues from the sales tax hike would be dedicated to K-12 public education.
The plan worked in Davidson County, where 56 percent voted in favor of the tax increase in a low-turnout election — slightly fewer than 16,000 votes were cast in a county with a population of 163,000.

Davidson plans to use the estimated $2.3 million annually to finance the construction of a new high school. In Rockingham, the $1.5 million annual revenue would help bridge a budget gap in debt service on new school construction.

In Guilford, schools Superintendent Mo Green told the Board of Education, “there are certainly many, many needs for our district.”

At the board’s July 8 meeting, Green presented his wish list for the extra revenue, which included funds to restore classroom teachers, instructional supplies and materials, tutoring services, textbooks, and technology.

In a phone interview, school board chairman Alan Duncan told Carolina Journal he was confident not only that the sales tax hike would pass, but also that the additional funding actually would go to the schools.

“I’m hearing from a large number of constituents who say they would be very supportive,” Duncan said. “I have a high level of confidence it will be directed toward schools, as commissioners stated that during their vote.”

In Rockingham, county commissioners were set for a vote to place the sales tax hike on the ballot back in July, but instead voted 4-1 to table the issue until mid-August.

News reports on the sales tax hikes in local newspapers are sure to include the fact that state statute does not bind legally to counties to implement statements of intent.

“The law does not compel the county commission to use the additional sales tax revenue for public education,” said Terry Stoops, director of research and education studies at the John Locke Foundation. “In the future, it can be used to support any boondoggle, corporate giveaway, or vanity project deemed worthy by the county commission.”

Moreover, according to the NCACC, a “board of county commissioners is not obligated to levy the tax even if the majority of those voting in a referendum vote in support of a levy,” which is a possibility should a board change its mind or the composition of its membership after an election.

Sam A. Hieb is a contributor to Carolina Journal.