October 5, 2010
Click here to view and here to listen to Michael Sanera discussing this Regional Brief.
RALEIGH — Guilford County voters have a chance to curb county commissioners’ “credit card” spending spree when considering a proposed $11.6 million tax hike. That’s the conclusion John Locke Foundation researchers reach in a new Regional Brief.
Voters will decide Nov. 2 whether county commissioners can raise the local sales tax rate 0.25 cents. As they cast their ballots, JLF experts urge them to consider the county’s “debt crisis,” Guilford’s apparent overspending on new schools, and the impact of a tax hike on a struggling economy.
“Running up excessive debt during good times and taxing in bad times is not a fiscally responsible way to operate a county,” said Dr. Michael Sanera, JLF Director of Research and Local Government Studies. “This report illustrates county commissioners’ inability to manage spending and debt.”
This is Guilford County commissioners’ third attempt since May 2008 to win voter support for a sales-tax increase. On their first try, 75 percent of voters rejected the tax hike, while 70 percent voted against the increase the second time around in November 2008.
Sanera examines the latest plea for higher taxes with the help of report co-authors Joseph Coletti, JLF Director of Health and Fiscal Policy Studies, and Dr. Terry Stoops, Director of Education Studies.
“This time county commissioners are asking for an $11.6 million tax increase, the equivalent of a 2.6-cent property tax increase,” Sanera said. “They say the increased tax revenue would be used to pay school bonds and possibly other bonds. Regardless of their promises, the law allows county commissioners to spend money from the tax increase on any legal purpose.”
That’s bad news for Guilford residents, given the county’s recent history, Sanera said. “Commissioners have been on a ‘credit card’ spending spree that has left the county with a debt crisis,” he said. “Now they are trying to use the tax increase to cover up the spending spree.”
A county guideline suggests debt service payments should not exceed 15 percent of the county’s operating budget, Sanera said. “Payments for the next five budget years all exceed that limit,” he said. “Even with new sales tax revenue, the county would need $20 million more for debt service than it is paying this year.”
This year’s debt service payment totals almost $71 million, Sanera said. “That amount jumps to $112 million by the 2012-13 budget year and remains above $100 million until 2018,” he said. “Clearly, the county commissioners have not been good stewards of the county’s finances.”
In addition to concerns about the county’s debt, Guilford voters should consider recent spending on school construction, Sanera said.
“While they rejected sales-tax hikes, Guilford voters approved two school facilities bonds in 2008 totaling more than $447 million,” he said. “A year later, Guilford County had two of the top three most expensive facilities projects in the state on a cost-per-square-foot basis. Plus media reports indicate the new Northern Guilford High School has plans for expensive ‘green’ technologies that will leave the school significantly less energy-efficient than comparable schools.”
Voters who approved the 2008 school bond referendums expected county commissioners to pay for school projects with existing funding streams, Sanera said. “Asking voters to approve a tax increase two years after the fact is akin to buying an expensive car and asking your boss to increase your salary to help you pay for it.”
Since the General Assembly decided in 2007 to give each North Carolina county the chance to seek voter approval for higher sales or land-transfer taxes, voters have rejected the option 68 times in 85 tries.
“Citizens at all levels — federal, state, and local — are frustrated with excessive and wasteful government spending,” Sanera said. “They believe they are not getting value for their tax dollars. County spending is no different. Guilford County voters should think thrice before rewarding the county commissioners with a tax increase. Voters have a chance to send commissioners a clear message Nov. 2.”
Michael Sanera, Terry Stoops, and Joseph Coletti’s Regional Brief, “Third Time’s Not the Charm: Guilford County still needs better spending, not higher taxes,” is available at the JLF Web site. 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].