Press Release

Cabarrus County seeks taxpayer bailout to cope with debt problem

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RALEIGH — After saddling county taxpayers with a mountain of debt, Cabarrus County commissioners want those same taxpayers to bail county government out of its problems. That’s how a new John Locke Foundation Regional Brief describes a May 17 referendum on raising the Cabarrus sales tax.

“Cabarrus County commissioners didn’t bother to ask voters for their opinions when the county borrowed $221 million in recent years, but now those commissioners want voters to approve a quarter-cent sales tax to help pay the bills caused by excessive debt,” said report co-author Dr. Michael Sanera, JLF Director of Research and Local Government Studies.

Voters have plenty of good reasons to question Cabarrus County’s request for additional money from taxpayers, according to the report from Sanera and co-authors Joseph Coletti, JLF Director of Health and Fiscal Policy Studies, and Dr. Terry Stoops, Director of Education Studies.

“Commissioners admit that they want revenue from this tax increase to pay for school construction debt, but there’s no guarantee that the money will be used for that purpose,” Sanera said. “By state law, once approved, this revenue can be used for any legal purpose.”

By October 2010, Cabarrus County had borrowed more than $333 million, including the $221 million that involved no voter approval. “In just the past three years, in the midst of a recession, the county borrowed $147 million for school construction,” Sanera said. “Payment on the debt now requires about 20 percent of Cabarrus County’s annual operating budget.”

Over the last five years, Cabarrus had the fourth-highest average per pupil capital expenditure in the state, Sanera said. “At $1,774 per student, Cabarrus County spent $877 more than the state average and nearly $1,000 more than Charlotte-Mecklenburg Schools.”

County commissioners are sending a confusing message about the debt spending, Sanera said. “In propaganda promoting the tax vote, county commissioners are deliberately conflating education spending and debt payments for new school buildings,” he said. “Spending in the classroom and paying off an overly large debt are not the same thing. Debt service now makes up about a third of county spending on education-related expenses.”

County debt covers more than just school buildings, Sanera said. “Cabarrus County is also responsible for repaying half of the debt for the North Carolina Research Campus, a dubious project that is largely dependent on diminishing state appropriations to state universities and community colleges.”

Overall, about one dollar of every five budgeted for Cabarrus County government operations in the current year goes to paying off debt, Sanera said. “That $42 million for debt is more than Cabarrus spends on human services, it’s more than spending on general government, and it’s more than spending on public safety.”

While county taxpayers have struggled with unemployment of 11 percent or more since 2009, home sales that fell nearly 80 percent in five years, home values that fell nearly 20 percent in the same time period, and gas prices near $4 a gallon, Cabarrus County has paid $1.3 million in targeted tax incentives in the past year, Sanera said. “Taxpayers have been subsidizing Great Wolf Lodge, a race-car wind tunnel company, and the Motor Racing Network.”

In addition, county taxpayers subsidize the local Arena & Events Center with $800,000 a year, spend $600,000 a year on the county fair, and devote $2 million to capital expenses for the county-run construction-and-demolition landfill.

“Scrap the incentives, and end the subsidies, and you could see about $4.7 million in savings, about the same amount that’s expected from the proposed tax hike,” Sanera said. “Plus privatizing the fair, events center, and landfill would provide one-time income for the county.”

Holding a single-issue election on May 17 is “unusual,” Sanera said. “Of 100 county tax-increase votes held since 2007, only 10 votes have been scheduled outside the normal May primary or November general election dates,” he explained. “Only 13 percent of tax-increase votes held on a regularly scheduled election date have passed, while 60 percent of the votes scheduled on other dates have passed.”

The message is clear, Sanera said. “Holding these single-issue elections is guaranteed to suppress voter turnout,” he said. “The reason this gimmick often works for county commissioners is that special-interest groups that benefit from the tax increase are more likely to turn out than the general taxpayers who end up paying the bills.”

Voters have an opportunity to send their own message, Sanera said. “It is an unfortunate reality that elected politicians find it easier to spend than tax, and it is easier to spend when the money is borrowed,” he said. “Cabarrus County voters will decide May 17 if they want to bail out with a sales tax increase the politicians who have placed the county in a hole of deep debt.”

The John Locke Foundation Regional Brief “Taxers’ Choice in Cabarrus: If the sales-tax increase fails, county threatens to hike property taxes,” is available at the JLF Web site. For more information, please contact Dr. Michael Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].

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