Convince taxpayers that spending needed, before opening spigot
NORTHEASTERN N.C. – Recent news reports say some counties are better off than others, and that Pasquotank and Chowan are struggling financially, while Camden is not. That tells you about some of the causes of poor economic results, but it does not tell the entire story. Obvious things such as low economic development and low job creation are certainly major factors. But how the counties spend available funds is equally to blame.
The scope of local government should be limited. Families, charities and for-profit companies can better accomplish many societal goals. Rather than seeking higher taxes, local governments should look to use existing revenues more efficiently.
Few people object to paying taxes if taxes are fairly assessed and money is properly used. All local governments in North Carolina have two ways to tax their citizens: The property tax and the sales tax. Some have additional taxes on rental cars, hotel rooms, meals, home sales, or businesses. Cities and counties also often charge separate fees for construction, water and sewer, solid waste removal, recycling, or electricity.
In 2007, the General Assembly set the base local sales tax rate at 2 percent and gave counties the option to levy an additional 0.25 percent after a supportive vote by county residents. Eight counties immediately approved the additional sales tax, and since then 18 more counties have voted to increase their sales taxes to the 2.25 percent rate. Counties also have the right to ask for an additional 0.50 percent sales tax to be used for local transit. Only four counties have had this tax on the ballot, and it was approved in three, allowing that trio of counties to have the highest combined state and local sales taxes in North Carolina at 7.50 and 7.25 percent.
The 2007 law that set the current sales tax rate was also responsible for giving the counties the option to increase the land transfer tax. More than 20 proposals to do so were put on the ballot, but were rejected by the voters every time. The 2011 General Assembly voted in bi-partisan agreement to repeal the land transfer tax option for counties. There are currently six counties that have land transfer taxes of 1 percent, which were created by individual state laws in the late 1980s and are not subject to the law repealed in 2011.
In Wilmington, the city is negotiating the building of a downtown “passive waterfront park,” costing the city between $3.5 and $4 million, while police have not had one pay rise in three years. The Charlotte City Council approved $87.5 million from the local occupancy and food and beverage taxes to renovate the Panthers’ stadium instead of expanding road capacity to alleviate traffic congestion.
Spending comes first with governments; if they did not spend money, they would not need to tax their citizens. Officials need to convince their citizens that they are spending wisely before imposing new taxes, fees, or other costs.
After a decade of property value increases, the markets saw marked declines in 2009. \
Governments need to prepare for a reset. Fifty-seven of the state’s counties haven’t revalued property since the recession in 2009, causing taxpayers to pay property taxes on inflated property values. County governments need to live within their means and stop taking over-inflated property tax collections from citizens. All counties should have revaluations on their properties after 2009 to assess taxpayers at a fair rate.
The median cost of local taxes and fees per person was $1242.17 in 2011. That figure represents 4.15 percent of per-capita personal income.
Local governments must earn the trust of taxpayers. Spending on municipal golf courses, economic incentive packages, downtown parks, privately owned athletic stadiums, convention centers and other non-essential services have at times received higher priority in local budgets than school buildings, sewer systems, police, fire departments and roads.
For local governments that typically face funding constraints, prioritization is the key.
In Pasquotank County, our commissioners and city council have provided economic incentives to the developers of the new shopping center adjacent to Walmart. While this economic development is important to the area and could be a job creator for some people, the benefit derived is questionable.
In a similar vein, our commissioners have already begun to debate how to spend the $7 million lease payment, which is due from Sentara in approximately 5 years. Last week, we reported that the County Commissioners had voted 4-3 to donate a truck to the city fire department rather than sell it to a citizen for $2500. This, despite the city failing to pay its water bill, causing the county to incur legal expenses unnecessarily.
At the same time, we reported that the Commissioners decided to let College of The Albemarle retain $42,000 that was originally appropriated for capital improvements but not spent.
One of our Commissioners recently expressed his hopes that the national economy would turn around because the cost of government expense was going up while the county population was going down and additional tax revenue might be derived from a more vibrant economy.
While certainly this is true, hope is not a strategy.
At a recent Commissioner meeting, the results of our county audit were discussed. The good news is that our Credit Rating had improved from A- to A. The commissioners all celebrated what a good job they had done in reducing the government debt from $78 million to $54 million, which includes 100 percent of the jail cost (shared to a small extent with Camden County.)
There is no doubt that these are all positive budget considerations, and our commissioners should be proud in these results. But, one of our commissioners made the statement that this would allow us to borrow more money. Apparently, spending money wisely, and debt reduction are not on the forefront of what our Commissioners are thinking.
These are but a few of the misplaced spending priorities of our County government. We do not have a spending problem — we have a taxing problem. The reduction in our debt is attributable in large measure to the tax increase of last year. Will we continue to pay down the debt with these additional taxes or will we borrow more money? Only time will tell.