September 13, 2011
RALEIGH — Buncombe County commissioners and the local community college president are trying to “hoodwink” voters into endorsing a sales-tax hike with an offer that’s too good to be true. The John Locke Foundation’s top local government expert reaches that conclusion in a new Regional Brief.
“Voters are told that an extra $7 million per year in sales tax will pay for new buildings and renovations at Asheville-Buncombe County Technical Community College,” said Dr. Michael Sanera, JLF Director of Research and Local Government Studies. “The government sales pitch suggests this additional taxpayer spending will create jobs. But our new report arms voters with questions that will help them put that sales pitch to the test.”
Buncombe County voters will decide Nov. 8 whether to allow county commissioners to add 0.25 cents to the local sales-tax rate.
“The first thing voters should know about the sales-tax increase is that money raised from the tax would go to the county’s General Fund, not specifically to community college projects,” Sanera warned. “Voters should beware that voting for the sales-tax increase would give county commissioners a blank check to spend in any way they choose.”
Sanera spells out a half dozen questions voters should ask before casting a ballot. “First, why should voters trust that commissioners will spend new tax revenue on buildings and renovations at AB Tech?” he asked. “The commissioners’ promises are only promises. Voters have no legal recourse if those promises are broken.”
Current commissioners cannot bind future boards to follow those promises, Sanera said. “That’s one reason why voters have no good reason to believe that the sales-tax increase will ‘sunset’ when the county has finished paying the bill for AB Tech improvements,” he said. “Can voters really trust that county commissioners 20 to 25 years from now will agree to repeal a tax adopted today? Voters should think twice before trusting commissioners to keep their word.”
The second question involves the type of funding county commissioners are pursuing. “Since sales-tax revenue can be spent for any legal purpose, why are commissioners asking for this type of tax hike and not a bond program for AB Tech capital improvements?” Sanera asked.
Voter approval of AB Tech bonds would guarantee that the money is used for the school’s buildings and renovations, Sanera said. “Plus the interest rate for bonds would be lower than funding new debt in other ways. The total bill for debt service could be 10 percent lower if Buncombe County pursued bonds for these projects.”
Sanera’s third question targets Buncombe County’s growing debt. “From 2005 to 2010, the county’s total debt grew by 32 percent,” he said. “In addition, the bill for debt service nearly doubled, rising from $118 per person to $228 per person. Considered another way, debt service climbed from 10.5 percent to 19.4 percent of local county revenues. Why are commissioners contemplating increasing Buncombe County’s debt again?”
In addition to concerns about growth in county debt, Buncombe voters should consider the share of new debt assumed without their input, Sanera said. “Six years ago, less than 40 percent of Buncombe County’s debt was taken on without voter approval,” he said. “Last year, that percentage had grown to 70 percent. Governments pay higher interest rates when voters play no role in approving debt. Taxpayers could face a 10-percent debt premium because of the scheme commissioners are pursuing for these AB Tech projects.”
The fourth question focuses on Buncombe County’s decision to buy a vacant Volvo plant and award targeted tax incentives to the plant’s new tenant.
“County commissioners have agreed to pay Linamar Corporation an incentive package of nearly $7 million to make engine blocks for a Volvo plant in Maryland,” Sanera said. “While Volvo and one of its suppliers seem to have figured out how to reshuffle operations to get taxpayer subsidies from gullible elected officials, those same officials hope voters will be gullible enough to replace the $7 million through a new sales tax.”
Sanera’s fifth question focuses on the Nov. 8 election date. “While municipal voters will head to the polls for city and town elections, this is the only item on the ballot for county residents,” he said. “Why? Could it be that county commissioners are depending on a higher turnout among more liberal Asheville voters, while more conservative county voters will be more likely to stay home?”
The final question targets county officials’ premise that taking another $7 million per year from taxpayers and giving it to government would produce a net increase in Buncombe County jobs.
“Why should voters believe that idea?” Sanera asked. “To believe that Buncombe County and AB Tech are more efficient than the private sector in creating jobs, one must believe that the county and college administrative overhead are lower, that their knowledge of what jobs are needed is greater, and that the jobs they create would add to the county’s overall wealth. Economists have shown over and over that government-based job creation fails on all three counts.”
Seeking answers to all six questions should give Buncombe County voters the information they need to make a good decision Nov. 8, Sanera said. “Buncombe County commissioners and the AB Tech president are selling this tax hike as a way to add jobs,” he said. “A closer look shows their claims are little more than the latest political ploy from politicians to increase the size and spending of county government.”
Michael Sanera’s Regional Brief, “A Blank Check for Buncombe: County commissioners ask voters for a sales-tax increase,” 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].