John Locke Update / Research Brief

Election 2020: Local bond and tax ballot questions

posted on in Education, Fiscal Insight, Local Government, Spending & Taxes, Transportation
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The middle of an economic and public health crisis, when people are worried if they will still have work in December and the federal budget deficit is in excess of $3 trillion, does not seem the best time to ask voters to approve new taxes or new local borrowing. But five counties in North Carolina are seeking higher sales taxes, two of them to help finance bonds also on the ballot, and other cities and counties are also asking voters to pay more now and pay more later.

Of the eight North Carolina counties that asked voters to raise the sales tax this spring, half were successful. Before this year, the record for sales tax votes in presidential primaries was 2-23. March’s 4-4 split may have advocates hopeful for the current round despite sales tax votes’ record over the 35 previous attempts, going back to 2007, of just 2-33. But the March primary came before Gov. Cooper began the 31-week-and-counting shutdown of parts of the economy.

Contrary to popular belief, renters do pay property tax as part of their rent. Landlords must pass some or all of the property tax burden to their tenants, along with maintenance and other costs of ownership. If they did not, they would lose money each month and would soon no longer be landlords.

Carteret and Guilford counties both have school bonds and sales tax increases on the ballot. Carteret County commissioners already passed a three-cent property tax increase. Other counties seeking a sales tax increase are Alleghany, Chowan, and Yadkin. The city of Raleigh has an $80 million bond for affordable housing on the ballot. Charlotte has a smaller, $30 million bond for affordable housing, but it has two other bonds that would add $70 million in debt for state roads and $70 million for local roads.

For more details on each referendum, see below.

Allegheny County

1/4-cent sales tax increase
Previous attempts: 2010, 2016, 2018
Amount: $195,000
Equivalent to 1.2¢ property tax

The county did not provide a specific purpose for the sales tax revenue on its Sales Tax FAQ page, which notes the money “can be used for any allowed use.”

Allegheny County’s $20.4 million budget with $16.8 million in General Fund appropriations is available here.

Carteret County

$42 million school bond

1/4-cent sales tax increase
Previous attempts: 2014, 2016
Amount: $3.6 million
Equivalent to 2.25¢ property tax

Waterway management and school bonds also on ballot

Carteret County commissioners already had a 10% property tax hike for the current fiscal year, from a revenue-neutral rate of 30¢ to 33¢ per $100, or roughly $4.8 million. General Fund property tax revenue is forecast to be $6.7 million higher ($53.2 million vs. $46.5 million). The sales tax increase would bring the total tax increase for the year to $8.4 million.

Commissioners say the county, which includes the port of Morehead City as well as the southern portion of the Outer Banks, would use a portion of the sales tax revenue for dredging and other waterway projects, though there is no way to earmark tax revenue in the General Fund. Bond proceeds would construct new facilities and make repairs and renovations, including new classroom facilities at Croatan High School and West Carteret High School, which are over capacity. Advocates say half of the sales tax, and through it the school bond, would be paid by “second homeowners and tourists,” but that ignores that short-term rentals and second homes in beach communities also pay a significant portion of the property tax. The current $123.6 million budget can be found here.

Chowan County

1/4-cent sales tax increase
Previous attempts: 2008, 2010
Amount: $300,000
Equivalent to 2.1¢ property tax

County commissioners said the money would pay to replace John A. Holmes High School with a new school still in downtown Edenton, although there is no way to ensure that is how future commissioners will use the money. The budget can be found here.

Guilford County

$300 million school bond

1/4-cent sales tax increase
Previous attempts: May 2008, November 2008, 2010, 2014
Amount: $14 million
Equivalent to 2.64¢ property tax
Pay for school bond also on ballot

Guilford County Schools’ $300 million bond this year is just the down payment on a $2 billion plan for to renovate existing schools, build new facilities, and close old school and administration buildings. County commissioners say they would use $14 million a year from a quarter-cent sales tax increase to pay a portion of the debt service. That is equivalent to a 2.64¢ increase to the 73.05¢ county tax rate.

Yadkin County

1/4-cent sales tax increase
Previous attempts: 2010, 2013
Amount: $580,000
Equivalent to 2.2¢ property tax

Sales tax revenue goes to the General Fund and cannot by law be earmarked. Despite that, a press release from the county said 40% of the money ($232,000 per year) would provide pay raises to the Sheriff’s Office and two new night-shift deputies, 40% would support ten volunteer fire departments and a volunteer rescue squad, and 20% ($116,000) would be reserved for future school capital needs. Rather than raise the sales tax, county commissioners would better prepare for the future with lower spending overall even if they dedicate more funds to core functions like public safety. County budgets can be found here.

City of Charlotte

$102.7 million state roads bond

$50.0 million subsidized housing bond

$44.5 million neighborhood roads bond

Charlotte’s $197.2 million bond proposals mark the final round of $800 million in bonds since 2014. Three-fourths of the current bond package would go to state roads through the city and neighborhood-level road projects. Similar bonds in the past three packages passed with large majorities.

City of Raleigh

$80.0 million subsidized housing bond

Raleigh Mayor Mary-Ann Baldwin and the new majority on the city council brought new attention to the importance of deregulation in expanding affordable housing and business activity in the city before riots and pandemic closures destroyed downtown businesses. Despite the uncertainties for future city revenues, council members kept plans on track for bonds to subsidize housing development around the city, presumably until homeowners and developers take advantage of regulatory reforms to provide sustainably affordable alternatives.

As Senior Fellow, Joe examines fiscal and tax policy. He previously headed the North Carolina Government Efficiency and Reform initiative within the Office of State Budget and Management, which led to changes in automotive fleet management, natural and… ...

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