October 31, 2011

RALEIGH — After raising property taxes by $1 million and increasing county revenues by $1.7 million between 2009 and 2010, Montgomery County commissioners are asking voters to dip into their pockets again for another $250,000 sales-tax increase. A new John Locke Foundation Regional Brief questions that plan.

Montgomery County voters will decide Nov. 8 whether to allow county commissioners to add 0.25 cents to the local sales-tax rate. Commissioners have promised to use the money for improving school facilities, “updating aging schools,” and making county school classrooms “more conducive to learning.”

“Proponents of this tax increase claim the Montgomery County school system has not received any funding for capital building needs in the last three years, but this is a misleading claim,” said report co-author Dr. Terry Stoops, JLF Director of Education Studies. “This new report corrects the record. It also reminds voters about other important facts they should keep in mind when they cast their ballots.”

Among the facts are numbers linked to county revenue growth. “Even when you adjust for inflation, Montgomery County’s property-tax intake increased by 6.1 percent and total revenue jumped 5 percent between the 2009 and 2010 budget years,” said co-author Fergus Hodgson, Director of Fiscal Policy Studies.

Stoops focuses on rebutting school funding myths. “It’s true that Montgomery County — like every other North Carolina county — has received no state corporate tax revenue for school facilities during the last three years,” he said. “But Montgomery continues to collect hundreds of thousands of dollars annually from the state lottery. Since 2006, Montgomery County schools have received $1.9 million in lottery funds earmarked for school facilities.”

“As of Sept. 27, the district had nearly $661,000 in lottery revenue available — over twice the amount of the annual revenue the county might receive from raising the sales tax,” Stoops added. “That’s not to mention the money available from existing local-option sales taxes.”

While complaining about the lack of money for school facilities, Montgomery County has spent more than $1.7 million on school facilities since 2009, Stoops said. “Much of that spending represents sound investments, but it’s alarming to see county and school officials ask for a tax increase after spending $250,000 for baseball field improvements at West Montgomery High School.”

Stoops also highlights concerns about the results Montgomery County has achieved from its education spending. “A survey this year from the liberal Center for American Progress indicated that Montgomery County Schools had a low return on investment compared to other North Carolina school districts,” he said. “This should raise red flags for voters who are being asked to spend even more money on local schools.”

Speaking of spending more money, Hodgson studied Montgomery County’s recent budget history.

“Facing a substantial budget crisis in fiscal year 2009, Montgomery commissioners spent all of their $1.5 million cash reserves to preserve overall county government spending levels,” Hodgson said. “So loose was their spending that it surpassed revenues by 46 percent, or $12.4 million.”

County commissioners then raised the property tax rate by 4 cents, part of a 9-cent rate increase over a three-year period. Even with those property tax increases, the county faced another revenue shortfall for the current budget year.

“Again Montgomery County commissioners are trying to tax their way out of their budget problem,” Hodgson said. “The request for a $250,000 sales-tax increase would bring tax increases over the last three years to about $2 million.”

Without this Regional Brief, Montgomery County voters might have a hard time finding key facts about county finances, Hodgson said.

“One reason many people are largely unaware that Montgomery County government is in such dire financial straits is that the county does not provide citizens with easily accessible information online,” he said. “NCTransparency.com gives the county government a D grade. The county does not have its checkbook, contracts, capital improvement plan, audit reports, employee salaries, or other important items online.”

Since the General Assembly voted in 2007 to permit county sales and land-transfer tax hike referendums, voters have rejected 82 of 101 requests from county commissioners across the state. “Citizens are frustrated with excessive, wasteful government spending at all levels,” Stoops said. “They believe they are not getting value for their tax dollar. The Nov. 8 referendum offers voters a chance to decide if they have confidence in commissioners’ stewardship of taxpayer dollars.”

The John Locke Foundation’s Regional Brief, “A Quarter-Million More for Montgomery? Secretive county seeks a third tax increase in three years,” is available at the JLF website. For more information, please contact Stoops at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].