News: CJ Exclusives

Wake Still Open to Sales Tax Increase

But leaders are cautious after voters rebuff hikes in other counties

Wake County is still open to putting a quarter-cent sales tax on the ballot, but county leaders are proceeding warily after similar referenda in other municipalities went down to overwhelming defeat in the primary last week.

“We have been cautious in moving forward with any additional revenue option, so I would not see any immediate placement,” said Joe Bryan, chairman of the Wake County Board of Commissioners. “I do think it is something we need to have some more discussion on and make a decision one way or another.”

Twenty-four counties considered either a quarter-cent sales tax or land-transfer tax May 6. North Carolina voters sent all but two of the ballot questions to defeat, rejecting the tax increases by an average two-thirds margin and particularly rallying against the land-transfer tax, which went 0-for-4.

Forty-six of the state’s 100 counties have put one or both of the local-option taxes on the ballot. Only eight counties approved the sales tax and none passed the land-transfer tax. That means 83 percent of counties have rejected the increases.

Even with that ratio, county leaders continue to pursue the tax options. Three counties — Burke, Columbus, and Polk — will vote on one of the options in November. Officials in other counties, such as Wake, are still pondering whether to put the taxes on the ballot.

“We’ve always talked about the sales tax. The land-transfer tax has never been an option,” said Wake County Manager David Cooke. “In all our conversations we’ve talked about tying it to school construction or the next bond.”

Most counties say revenue from the new local-option taxes would go for infrastructure needs such as schools and parks. But new plans in Wake County for expanded mass transit, including a 56-mile rail system, could complicate matters because transit backers have suggested a half-cent sales tax to partially fund the project.

The Special Transit Advisory Commission, created by the Triangle’s two metropolitan planning organizations, is expected to release final recommendations for the new transit system this month. Commission members suggested a sales tax, $10 vehicle registration fee, and state and federal funding to handle the estimated $8.2 billion cost over the next 27 years.

“From my perspective as a county commissioner, there would be a conflict there,” Bryan said. “I am charged with providing for schools, and if there is additional revenue, I would like to see it go for schools rather than mass transit.”

Readiness for new taxes

County commissioners might consider the sales tax during their next work session dedicated to budget issues, but there is no groundswell of support among county leaders or the public to rush the tax onto the ballot, said Wake County Commissioner Tony Gurley.

“This last election confirms what a lot of people suspect: The public is not ready for tax increases,” he said. “With the economy declining and property values going down, I don’t think the public is ready for this.”

Asked whether Wake County voters would be more receptive to tax increases than voters in other regions, Gurley said the county has justified the need for new funds better than other counties, but that isn’t enough to offset voter reluctance.

“I’m not ready to go out on a limb and campaign for the tax,” he said.

Local leaders will have to gauge and engage voter sentiment if the county wants to successfully pursue the sales tax, said Paul Coble, a former Raleigh mayor and current Wake County commissioner. Coble pointed to new tax burdens, including property tax re-evaluations this year, that put a heavy strain on citizens.

“I don’t think the voters are going to be in much of a mood to pass a sales tax on top of all that, especially in tough economic times,” he said.

Advocacy controversy

While counties can use public funds to educate voters about ballot referenda, they are prohibited from using such funds to lobby for passage of new taxes. Critics allege that many county commissioners failed to walk the fine line between education and advocacy during the lead-up to the primary.

Counties across the state used public funds to hire private consulting firms to educate voters about the ballot referenda, but some say the campaigns amounted to taxpayer-funded efforts to get voters to approve higher taxes.

In the Triangle, for example, critics targeted Orange County for spending $100,000 to hire a media firm to wage an advertising campaign leading up to the primary. The county also paid a polling company $10,000 to conduct a telephone survey on residents’ attitudes toward the tax increases. Voters ended up rejecting the land-transfer tax by a two-thirds margin.

“It’s unconscionable to use public money to educate the public about a tax increase,” Gurley said. “I can’t imagine that we would use taxpayer money for an education program on the sales tax if it comes up.”

Critics have also raised questions about the N.C. Association of County Commissioners, a taxpayer-funded group that lobbies on behalf of the state’s 100 counties. The association has conducted seminars to train county leaders how to sell the tax options to voters.

In an interview with Carolina Journal, David Thompson, executive director of the NCACC, said his organization does not take a position for or against any of the local-option taxes and leaves the decision of whether to pursue one or both of the options up to each individual county.

“Counties need to look at the whole revenue picture and then determine their own needs, whether it’s from growth or the need for new infrastructure to encourage growth,” he said. “It’s a complex mix that each individual county has to evaluate.”

Thompson declined to comment on the appropriateness of Orange County’s decision to hire an advertising firm to reach voters.

If residents think their counties are illegally advocating for a tax, they can take it up with commissioners and the county attorney, he said.

David N. Bass is an associate editor of Carolina Journal.