Legislators may expand exclusions

County property tax base would suffer under proposals

With property valuations going up significantly in several coastal and mountain counties, the General Assembly is set to take a look at providing some relief for certain property owners this session.

The Association’s Tax and Finance Steering Committee met Feb. 28 to hear how these property tax exclusions could impact counties. Forsyth County Tax Collector Pete Rodda, president of the North Carolina Association of Assessing Officers, presented several scenarios the General Assembly could use to provide relief.

North Carolina currently provides a Homestead Exclusion for seniors age 65 or older, or citizens who are permanently and totally disabled and whose income is less than $20,500 (2007). Eligible citizens can apply for the exemption and will have the greater of either $20,000 or 50 percent of the value of their permanent residence excluded from the property tax.

According to Rodda, more than 82,000 North Carolinians claimed the exclusion in 2005, resulting in a loss of county revenue of more than $23 million statewide.

Other states are trying other approaches to the issue. Rodda said one approach is a blanket exclusion, which is given to all homeowners regardless of income. An example would be that all property owners only pay taxes on 80 percent of their property’s assessed value.

“If you take away a big chunk of your tax base, it is very costly,” he said. “All the classification system does is redistribute the tax burden.”

Another approach would be to cap the assessment growth. In other words, the assessed value can only increase by a certain percentage each year, regardless of the property’s actual value. Rodda said this would serve to provide a larger tax break for citizens who live in areas where property values are quickly rising. Citizens whose property values do not rise higher than the cap would receive no tax relief.

“It destroys any concept of equity,” Rodda said. “All it is is an arbitrary and capricious way of holding down the value. It doesn’t have much to do with the income of the individual. If you freeze your value at an arbitrary level, then your rate is going to go up.”

Another idea that is gaining in popularity across the nation is called a “circuit breaker,” in which the amount of property tax paid is directly tied to an individual’s income. This approach is designed to provide targeted relief to low-income citizens by capping the amount of property taxes they pay to a percentage of their income.

Rep. Robert Grady (Onslow) filed bills in early March that would double the Homestead Exemption income threshold to $49,000 (H539) and cap the assessed value’s annual growth (H540). Sen. Harry Brown (Onslow) also filed a bill to institute a circuit breaker approach to property tax relief (S412).

“Every bit of this has an unintended consequence that will bite somebody,” Rodda said. “It might not be your county, but it might be the one next to you.”

Rodda said the assessing officers are urging the General Assembly to establish a study commission to examine the issue thoroughly before making any significant policy changes that would negatively impact county revenues. The Association adopted a legislative goal in January to “support legislation to provide for a study of the system for re-evaluation of ad valorem property and its effect on low-income taxpayers.”

– Todd McGee

Environment committee OKs nutrient offset goal

The Environment Steering Committee met Feb. 23 and gave its thumbs-up to a legislative goal involving a nutrient offset program in the Tar-Pamlico and Neuse river basins.

By rule, developers building within the river basins must address pollution runoff into the rivers by either mitigating the runoff onsite, for example by means of a retention pond or vegetative buffer, or by paying the state a fee to offset nitrogen and phosphorous that the development would produce.

If the developer chooses to mitigate the nutrients via payment, the state requires an $11 payment per pound per acre of nitrogen, and $11 per tenth of a pound per acre of phosphorous. The per acre fee is set to increase to $57 for each nutrient following completion of an independent study if no action is taken.

The goal would put the $57 fee in effect in 2009 if the General Assembly does not act on environmental recommendations by the end of the 2007 session.

The goal was referred to the steering committee by the Legislative Goals Screening Committee at the Legislative Goals Conference in January. The Association’s Executive Committee also approved the goal, and NCACC staff is currently seeking a bill sponsor.

The steering committee, chaired by Person County Commissioner Jimmy Clayton, also heard from representatives of the Department of Environment and Natural Resources on a new well inspection program and several proposals involving landfill franchising laws, regulations, and operational, tipping and application fees. The committee will consider making policy recommendations on those matters during its next meeting, scheduled for Thursday, March 29, from 10 a.m. – 2 p.m. at the Albert Coates Local Government Center in Raleigh.

– Jason King

Partners continue to work out details of H1779 implementation

The H1779 Implementation Committee, made up of tax assessors, collectors and county commissioners, met Feb. 16. The group received an update on discussions between the Division of Motor Vehicles, Department of Revenue and the NCACC on the implementation of legislation passed in 2005 that combines the issuance of a vehicle registration with the payment of property taxes.

State agency working groups and involved parties are currently determining cost, logistics and details of the program.

NCACC Assistant General Counsel Paul Meyer reported that one of the many issues still under negotiation involves credit card fees. Currently, consumers renewing or obtaining vehicle registrations in person can only pay tag agents by cash or check, but can renew online with the DMV and pay by credit card. At issue is which agency would absorb the cost of credit card fees to allow consumers to also pay their property taxes by credit card either through the DMV online or at a local tag agency.

The committee heard that the 3 percent increase in the interest rate charged to delinquent taxpayers is on track to pay for upgrades to the DMV’s computer system. The upgrades are required for the state agency to collect county property taxes.

The law would enable counties to improve the collection of property taxes on motor vehicles by requiring that the property taxes be paid at the time of purchase instead of “in arrears.” This new system could result in approximately $45 million in uncollected motor vehicle property tax revenues for counties.

The system is scheduled to be in place by July 2010.

– Jason King