January 31, 2006

RALEIGH – Local taxes and fees in Asheville totaled about $1,819 per resident in 2004, ranking the city 3rd out of 26 major N.C. cities in local government costs, according to a new report from the Center for Local Innovation.

Asheville moved up from fourth to third in the past year – trailing only Charlotte and Wilmington in the rankings of combined city and county costs per person. Durham and Chapel Hill rounded out the top five in the list of 26 municipalities with at least 25,000 residents. Jacksonville, Thomasville, Goldsboro, Kannapolis, and Rocky Mount ranked lowest among the larger cities.

Among medium-sized and small municipalities, some Western North Carolina communities had relatively high local government costs per resident. Brevard ranked eighth ($1,802) and Waynesville 15th ($1,667) among the 90 municipalities in the state with populations between 5,000 and 25,000 people. Franklin ($1,825), Tryon ($1,796), Murphy ($1,697), and Sylva ($1,604) all ranked among the top 40 within the list of 230 municipalities that have populations of 1,000 to 5,000 residents.

A couple of WNC communities – Forest City ($1,139) and Mars Hill ($958) – ranked among the communities with the lowest local-tax burdens. Most communities had local revenues per person near the average for their population group. That includes Black Mountain ($1,557), Hendersonville ($1,498), Columbus ($1,429), Marion ($1,319), Burnsville ($1,312), Bryson City ($1,251), Andrews ($1,242), Morganton ($1,236), and Rutherfordton ($1,217).

Macon County (5.91 percent) had one of the state’s highest rates of taxes and fees as a share of income. Macon ranked ninth among the 100 counties. Transylvania County (5.22 percent) also ranked among the top quartile. Both counties saw their rates climb almost twice as high as the state median. While the median county saw its local tax burden grow as a share of income by 6.78 percent, the rate climbed by 13.83 percent in Macon County and 12.57 percent in Transylvania County.

On the other end of the spectrum, four WNC counties ranked among the 25 counties with the lowest tax and fee burdens per person. They were Swain (3.89 percent), McDowell (3.84 percent), Polk (3.45 percent), and Madison (3.08 percent). McDowell remained among the state’s bottom quartile, despite the largest increase in tax burden in the state. McDowell’s rate climbed from 3.21 percent in 2003 to 3.84 percent – a jump of 19.33 percent.

About half of the WNC counties had rates closer to the state median of 4.64 percent. They include Buncombe (5.07 percent), Haywood (4.99 percent), Mitchell (4.71 percent), Cherokee (4.69 percent), Graham (4.69 percent), Jackson (4.42 percent), Rutherford (4.32 percent), Clay (4.07 percent), Burke (3.99 percent), and Yancey (3.93 percent).

“By the Numbers 2006: What Government Costs in North Carolina Cities and Counties” is the eighth such report published by CLI, a division of the John Locke Foundation. Policy analyst Michael Lowrey authored the study. He used the most recent data available from the State Treasurer, the Census Bureau, and the 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.

Local government costs rose in more than two-thirds of North Carolina counties from 2003 to 2004, the CLI report stated. In the median county, city and county taxes, fees, and charges consumed 4.64 percent of personal income in 2004, up from 4.35 percent in 2003 and 4.14 percent in 2002.

Among the 10 most populous counties, New Hanover (6.53 percent), Durham (6.04 percent), Mecklenburg (5.90 percent), and Guilford (5.22 percent) ranked relatively high in average cost of local government. Buncombe (5.07 percent), Gaston (4.99 percent), Forsyth (4.93 percent), Wake (4.75 percent), and Cumberland (4.29 percent) ranked near the middle of the pack, while Onslow (3.46 percent) ranked low.

Expressed in terms of dollars per resident, local tax and fee collections in the median North Carolina county stood at $1,088 in 2004, up from $1,071 in 2003 and $1,016 in 2002. A somewhat stronger economy combined with a higher sales-tax income produced the greatest increase in local revenues, though property tax revenues also grew at a faster rate than inflation and population growth, the report stated.

“Taxpayers are paying an increasing share of their income to city and county governments in North Carolina, for a variety of reasons,” said Chad Adams, CLI director and a Lee County commissioner. “One of the causes has been the willingness of officials in Raleigh to balance the state budget by imposing additional costs on local government or taking away their traditional revenue streams.”

North Carolinians paid an average of 29 percent of household income in taxes and other government fees and charges in 2004, the report concluded. State and local governments made up 11.7 percent of that burden. Property taxes alone consumed 2.22 percent of personal income in 2004, or about $537 per person.

Lowrey and Adams noted that a high cost-of-government ranking in “By the Numbers 2006” does not necessarily mean that a city or county is poorly governed.

“Debate concerning what taxpayers are getting for their money is not only healthy but necessary in a free society,” Adams said.

The Innovation Guide, “By the Numbers 2006: What Government Costs in North Carolina Cities and Counties,” is available on the Locke Foundation’s web site. For more information, please contact Chad Adams at (919) 828-3876 or [email protected]. To arrange an interview, you may also contact JLF communications director Mitch Kokai at (919) 306-8736 or [email protected].