RALEIGH – It’s election season in North Carolina again. Think local politics isn’t all that important? Then you haven’t been paying attention lately.
With the exception of the Iraq War, few issues are as contentious among politically active North Carolinians right now as school reassignment, growth controls, traffic congestion, transit plans, water and sewer woes, and annexation. Local governments determine or at least significantly affect the outcome of all these debates, which will define the 2007 election cycle.
In much of the state, however, it won’t be the head-to-head candidate match-ups that make the big news. Those were typically the headline-grabbers during the 1990s, when hard-fought contests for mayor and city council in Charlotte, Raleigh, Winston-Salem, Durham, and other cities commanded public attention and signified the increasing competitiveness of North Carolina politics. For the most part, city and even school-board elections this year won’t be decisive (though spirited mayoral contests in Cary, Wilmington, and Durham will be worth watching). Instead, much of the political energy and resources will go into high-stakes public referenda in communities across the state.
Let me put this in perspective for you. North Carolina is not much of an initiative-and-referendum state. Actually, it’s not at all an initiative state. Citizens can’t place consequential issues directly on the state or local ballot (except in a few cases). Elected officials control the flow of ballot items. For several reasons, that flow will reach flood stage in 2007.
Earlier this year, Gov. Mike Easley and the General Assembly approved legislation allowing counties to enact via referendum one of two new revenue options: a .4 percent increase in the tax on real-estate transfers or a quarter-point hike in the retail sales tax. More than a quarter of North Carolina’s 100 county commissions have taken lawmakers up on the offer. Eleven will hold referenda on the transfer tax. The same number will hold votes on the sales tax. Five counties – Graham, Rutherford, Davie, Harnett, and Johnston – will have both options on the ballot (even if voters say yes twice, only one can be enacted).
These aren’t the only local referenda with the potential to hike tax rates. Voters in Monroe are being asked to approve a new meals tax to generate nearly $1 million a year to build a new civic center. There’s a staggering $1.3 billion worth of bonds on the ballot in Mecklenburg, Wake, Durham, Gaston, and Macon counties to fund school construction ($890 million of the total), community colleges, streets, and other capital items. If passed, these new debts would prompt most of the localities to up their property taxes.
The total fiscal impact of all these votes would not be massive in a statewide context: $70 million from the sales and transfer tax options, should they all pass, plus several million more in property taxes. State-level tax hikes do far more fiscal damage, but the 2007 votes would be just the first wave. If spending lobbies do well in these local votes, you can expect many more local politicians to try their luck with the sales and transfer taxes in 2008. They have long yearned for alternatives to the property tax, the costs of which are highly visible and widely applied, making it unpopular. The sales tax is politically attractive because few voters realize how much it costs them, and are told that it significantly shifts the cost of government to visitors, immigrants, and drug dealers (a gross exaggeration). The transfer tax is politically attractive because few voters expect to sell their homes in the immediate future, and are told that it significantly shifts the cost of government to developers, Yankees, and especially Yankee developers (also an exaggeration, though not as gross).
Although it will be a cold consolation to those who reside or do business in the cities and counties that may end up with higher taxes this year, a single referendum in Charlotte-Mecklenburg could result in a tax reduction that would largely if not fully offset the potential tax hikes elsewhere. Voters will decide whether to keep or repeal a half-cent sales tax that has funded a senseless rail-transit plan and a wasteful increase in bus subsidies. If Mecklenburg’s transit tax is repealed, that would reduce the tax burden there by nearly $80 million a year. Perhaps Charlotte will no longer be able to claim the dubious distinction of the highest-taxed major city in North Carolina.
Don’t be dismissive of the importance of the 2007 elections. There’s a lot riding on what voters choose to do – or, given past performance, choose not to do, by which I mean showing up at the polls.
Later this week: more details on the 2007 local-election cycle in North Carolina.
Hood is president of the John Locke Foundation.