RALEIGH — Charlotte finds itself in the familiar position of leading North Carolina’s largest cities in the John Locke Foundation’s annual ranking of local tax-and-fee burdens.
Residents of the Queen City and the rest of North Carolina are learning about the rankings later than normal this year, thanks to a record number of late reports from local governments across the state.
With a city and county government bill topping $2,388 per person in the 2012-13 budget year, Charlotte ranked No. 1 among 33 ranked cities with populations of at least 25,000 people. Charlotte edged out No. 2 Mooresville ($2,386 per person), with Wilmington ($2,242), Durham ($2,199), and Monroe ($2,167) rounding out the top five.
Raleigh ($1,937) ranked No. 10. Greensboro ($1,885) ranked No. 15.
But Chapel Hill, which ranked No. 3 on the list in 2012, is unranked in the latest report because of incomplete data. The same is true for two other cities typically ranked within the larger-city list: High Point and Rocky Mount.
The omission of three cities from the list points to a growing problem tied to compilation of data for JLF’s By The Numbers report. “Fiscal Year 2013 proved to be a bad year for local governments to turn in their State Treasurer’s Annual Financial Information Reports,” said report author Michael Lowrey, JLF Economics and Regulatory Policy Analyst. “A record number of localities simply had no results available in time for the report’s release.”
The budget year covered in the latest By The Numbers ended June 30, 2013, more than two years ago. Local governments have completed two annual budget cycles and one two-year election cycle since then. Still, incomplete data mean that six counties and more than 80 municipalities of all sizes remain unranked in the new report.
“Without those AFIR statements, By The Numbers cannot include local tax burdens for those communities,” Lowrey said. “Complete reporting would result in a somewhat higher combined county-municipal median tax burden.”
“In addition, one government’s missing report can affect another government’s ranking,” he added. “For instance, a city might not be ranked because its county failed to submit reports on time. On the other hand, a county’s ranking might be skewed because of the absence of data from one or more of its cities.”
The number of unranked communities grows despite the fact that Lowrey has pushed back the release date of his report in recent years to accommodate as many stragglers as possible. For years, the Locke Foundation issued By The Numbers each January. As more local governments started missing report filing deadlines, the BTN release date slipped back to February and March. The last By The Numbers report, covering the 2011-12 budget year, came out in June 2014.
With the later release date, BTN readers should use caution when applying the latest data and rankings to present-day circumstances in their municipality or county, Lowrey said. “While taxing and spending patterns, and even the elected officials making those decisions, might have changed over the past two years, the data still offer a valuable historical record.”
The average North Carolinian paid 4.31 percent of his personal income to fund city and county government in the 2013 budget year. That figure was up slightly from 4.28 percent in 2012.
“The typical resident of the median county in North Carolina paid $1,295 in taxes and fees to county and municipal governments,” Lowrey said. “That’s down from an inflation-adjusted figure of $1,307 per person the prior year. But the average North Carolinian actually paid more since many of the state’s more populous counties also had above-average local tax and fee burdens.”
A family of four in the median county faced an average tax-and-fee burden of $5,182. “That’s a significant burden, especially given the high levels of state and federal taxation at the time,” Lowrey said.
Local government collected $16.1 billion in property, sales, and other taxes and fees during the budget year that stretched from July 2012 through June 2013, Lowrey reports. “Local government revenues increased by roughly $300 million in that budget year,” he said. ” Sales tax revenues grew by $80 million, or 3.5 percent, while property tax receipts increased by $130 million, or 1.5 percent.”
Among the list of 33 ranked municipalities with at least 25,000 residents, Jacksonville ($1,268 per person), Thomasville, Indian Trail, Fayetteville, and Asheboro had the lowest local government tax-and-fee burdens.
Lowrey calculates the burden by adding all local taxes and fees collected in the city, then dividing by the total population. “That total includes both municipal and county taxes and fees, so a city’s ranking depends to some extent on the taxes and fees levied by the surrounding county,” he said.
Some commentators have questioned whether communities with higher sales-tax revenues ought to be labeled “high-tax communities” in the annual report. “Localities retain the discretion to determine their overall revenues by altering their property-tax rates and the other taxes and fees they collect,” Lowrey said. “Thus higher sales-tax revenues allow a community to lower its property-tax rates, provide more services, or both.”
Kill Devil Hills, Carolina Beach, and Oak Island had the highest local per-person tax burdens among 83 ranked N.C. communities with populations between 5,000 and 24,999 people. The report ranks each of these communities, along with 176 municipalities with populations between 1,000 and 4,999 people. Even residents of 179 municipalities with populations of fewer than 1,000 people can see how their communities rank against their peers.
By The Numbers: What Government Costs in North Carolina Cities and Counties FY 2013 is the 17th such report published by the John Locke Foundation. Lowrey used the most recent data available from the State Treasurer, Bureau of Labor Statistics, and Bureau of Economic Analysis to construct rankings of local government cost on a per-person basis. For counties, he also constructed rankings on a share-of-income basis.
Lowrey also repeated his annual warning against comparing the relatively high per-capita tax numbers in resort communities to those in other N.C. cities. Communities with larger numbers of second homes and resorts — combined with small year-round populations — will see larger per-capita tax burden figures, he said.
Among the 10 most populous counties, Durham (5.73 percent), Mecklenburg (5.26 percent), New Hanover (4.95 percent), Forsyth (4.54 percent), Buncombe (4.47 percent), and Gaston (4.44 percent) all ranked among the top 25 N.C. counties in average cost of local government. Wake (4.38 percent), Guilford (4.34 percent), and Union (3.89 percent) ranked near the middle of the pack. Cumberland (3.09 percent) ranked No. 80 of the 94 ranked counties. Guilford County’s numbers are skewed by the absence of data from High Point, Lowrey noted.
North Carolina collected $22.8 billion in state tax and fee revenues from July 1, 2012, to June 30, 2013. That’s 6 percent of state residents’ personal income. Local governments collected an additional $16.1 billion in property, sales, and other taxes and fees. That’s another 4.3 percent of personal income.
“Combined, they represent a state and local tax and fee burden of 10.3 percent,” Lowrey said. “Federal collections raise the total tax burden on North Carolinians to approximately 27.5 percent of personal income, on average.”
Lowrey stresses that a high cost-of-government ranking in the By The Numbers report does not equal a judgment that a city or county is governed poorly.
“By The Numbers is a tool that represents factual data only, without editorial comment or bias,” Lowrey said. “The best way to compare your city or county to others is to find municipalities or counties of similar size and demographics.”
“This report helps taxpayers evaluate whether the services they receive from local government merit what they are paying for them,” he added. “We hope taxpayers will continue to ask about the proper role of local government and its relationship to the state. It’s important to keep these discussions alive and to ensure our local leaders remain accountable to taxpayers.”
The John Locke Foundation Policy Report, “By The Numbers: What Government Costs in North Carolina Cities and Counties FY 2013,” is available at the JLF website. For more information, please contact Michael Lowrey at (704) 569-4269 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].