Press Release

Facts raise doubts about Durham’s proposed $26.5 million sales tax hike

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RALEIGH — Durham County voters have good reasons to question a pair of sales tax increases on the November ballot that would take another $26.5 million per year out of their pockets. John Locke Foundation experts make that case in a new Regional Brief.

The Nov. 8 ballot includes a proposal to raise $17.3 million by increasing the sales tax rate 0.5 cents for transit projects. A separate 0.25-cent rate increase would take another $9.2 million per year from local taxpayers.

“Despite county commissioners’ claims about how much Durham County government needs this money, the facts surrounding both sales tax proposals raise serious concerns,” said report co-author Dr. Michael Sanera, JLF Director of Research and Local Government Studies. “Voters who dig into the details will find plenty of reasons to doubt that Durham County needs this additional money.”

Sanera examined both tax hike proposals with the help of Daren Bakst, JLF Director of Legal and Regulatory Studies; Fergus Hodgson, Director of Fiscal Policy Studies; and Dr. Terry Stoops, Director of Education Studies.

For the transit tax increase, a key concern involves potential use of Durham County sales tax funds for regional projects, Bakst said. “Educational materials linked to the tax proposal and the official Durham County Bus and Rail Investment Plan make clear that funds would be used to subsidize regional bus, commuter rail, and light rail,” he said. “Funds would be used to enhance regional transit. That could cause problems under state law.”

The law specifies that transit tax proceeds may be used only to benefit the “special district” where the tax is assessed, Bakst said.

“In this instance, the Triangle Transit Authority designated Durham County as the special district,” he said. “Therefore, all proceeds may be used only for the benefit of Durham County. Looking at the plain language of the law, if funds benefit any entity besides the special district — such as Orange or Wake counties — this likely would be an improper use of the funds.”

Legal restrictions aren’t the only concern, Bakst said. “Regardless of the legality of how funds are used, Durham County residents are being asked to support a significant tax increase for a plan that’s speculative at best,” he said. “If governments in Orange and Wake counties do not move forward with their own transit taxes, Durham taxpayers could end up footing the bill for regional transit on their own.”

Beyond the funding issues, voters should question the transit program’s value, Sanera said.

“Durham County commissioners want taxpayers to support more than doubling the county’s current spending on transit,” he said. “This is true even though Durham already subsidizes 58 cents of every passenger mile and $2.27 for every trip on a local bus. Add trains to the mix, and the numbers from Charlotte’s light rail system suggest Durham taxpayers could pay $3.61 per passenger mile and a whopping $20.14 per trip.”

Since trains travel on fixed routes, they rarely go where people want to go, Sanera added. “Taxpayers would be forced to pay for extremely expensive transportation that hardly anyone will use,” he said. “Plus it’s ironic that people who support the train option as a way to reduce pollution and energy consumption would be promoting a mode of travel that increases pollution and uses more energy.”

Turning to the 0.25-cent sales tax issue, Hodgson urges voters to consider Durham County commissioners’ record. “Over the past five years, both county spending and taxation have expanded beyond inflation and population growth,” he said. “The two ballot initiatives would accelerate the growth of both government spending and revenue extraction from taxpayers.”

Spending on health and social services has increased 11 percent faster than inflation and population growth over the past five years in Durham County, Sanera said. Education spending has increased 6 percent faster than inflation and population growth.

“County commissioners claim that Durham Public Schools would receive most of the money from the tax increase,” Sanera said. “But taxpayers have no legal guarantee that the money would be spent for this purpose. The law allows commissioners to use these funds for any legal purpose.”

There’s no compelling case that Durham schools need the additional money, Stoops said. “Between 2004 and 2010, Durham County taxpayers spent more dollars per pupil on K-12 public education than nearly all other school districts in the state,” he said. “Durham’s annual rank ranged from No. 5 to No. 7 among the state’s 115 districts. Local spending averaged $1,065 more per pupil than the state average spending for this period.”

Despite this above-average revenue stream, results have been mixed, Stoops said. “Even the liberal Center for American Progress concluded this year that Durham Public Schools have a below-average return on investment,” he said. “Durham taxpayers should consider the district’s use of resources before they vote to increase them.”

Sanera reminds Durham voters that they hold the power to determine whether either sales tax proposal moves forward. “Citizens at all levels — federal, state, and local — are frustrated with excessive and wasteful government spending,” he said. “Voters can decide Nov. 8 whether they have confidence in Durham County commissioners’ stewardship of county tax dollars.”

The John Locke Foundation’s Regional Brief, “Durham’s Tale of Two Tax Increases: County seeks $26.5 million’s worth of sales-tax hikes for schools and transit,” is available at the JLF website. For more information, please contact 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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