Just a little over a year ago, when the John Locke Foundation ramped up its Charlotte presence with this Web site and other Queen City-centric attention, we said Charlotte was at a crucial tipping point. It could continue to be a vital and vibrant growth-engine, or follow the same tired, tax-and-spend, centrally-planned model of dozens of failed American cities.
Now we have the first indication which direction Charlotte might be tipping and the news is not good. Tara Servatius reports that new business creation is trending downward. This is one of those hidden-in-plain-sight stories the Uptown rah-rah crowd loves to ignore. What’s more, and what should truly frighten anyone who wants Charlotte to have a strong, growing economy, local officials say they do not know why it is happening.
Servatius tried to lead them to the answer, citing new Locke Foundation research that once again placed Char-Meck’s tax burden the highest in the state — by far. Yet that undeniable fact still does not click.
“No, any way you look at our taxes, they aren’t high. We have a very fair tax base in Mecklenburg County when you compare services,” one Chamber of Commerce official tells Servatius.
Any way you look at our taxes, they aren’t high. Read that again. Any way. That is the tip. The hint. The nudge. Charlotte is on the wrong track with that kind of thinking; willful non-thinking, actually. Let’s just look at taxes a couple ways and see where that goes.
Last year Charlotte passed a hike in the business privilege license, a direct tax on business activity. The city expects to bring in $13.7 million from that levy in 2007, up from $9 million in 2004. That is 30 percent more revenue sucked out of the private sector and into government. Might that deter business formation in the future? Evidently not according to the Chamber.
The other overlooked city tax hike last year, for water and sewer service, continues the upward trend in the area as well. The State Treasurer says that Charlotte’s utility revenue — most of it from water and sewer fees — zoomed to $205 million last year from just $134 million in 2000. The city expects this revenue source alone to hit $217 million in 2007.
Turning to county property taxes, Mecklenburg County itself says the county is out of step with other similar North Carolina jurisdictions. The county pegs the local burden at 2.10 percent of household income compared to 1.72 elsewhere. Measured this way, this means that Mecklenburg property taxes are about 20 percent higher than other N.C. cities. Any way?
Incidentally, the Chamber’s blindspot on the property tax burden helps explain why the group can back a $427 million school bond for CMS and fully expect voters to approve it no matter what it might mean for future property tax rates. The reality is quite different. Coming on the heels of the 11 percent property tax hike Parks Helms rammed through in the spring, no wonder voters were gun-shy in November about giving more spending authority to the county.
And speaking of future property tax rates, all signs point to the city of Charlotte starting the 2006 budget debate with a budget assumption that raises property tax rates by about 10 percent. The first tax rate hike in 18 years would send a powerful signal that Charlotte has, in fact, changed directions. Then again, given the spending orgy the city has been on, a tax hike is pretty much what officials must have planned on. The city’s operating fund, not including debt service which can vary with building plans, is slated to go to $912 million next year, up from $724 million in 2004. That is a 20 percent increase in a few years and points toward a $1 billion city operating budget by 2010.
One billion dollars. Yes, Dr. Evil — you heard that right. But no one in city government seems to hear it.
From his city beat blog Richard Rubin tells us that even when the city’s own survey of small business owners turns out up concern about taxes, that concern somehow does not rank among the “solutions” for small business development. Here’s an idea: Get the city out of the econ development biz altogether, saving at least $6 million a year. This would be part of a spending overhaul that will help drive down the need for the high taxes the business owners complain about.
But the present direction is clear. Both year-to-year trends and comparisons to similar jurisdictions point to out-of-control local spending. That spending is in turn driving the demand for tax hikes; the higher taxes then depress vital job-creating, small business activity.
Should this pattern continue one day soon, maybe not this year or the next, but as surely as night follows day, the Queen City will stumble and fall. In its place a common burg will stand, comfortable enough — like a tattered college sweatshirt or an old, stained couch — but with the taint of slow decay. Numbly we’ll drift along on past glory, dreaming of what might have been.
