Sales tax referendums go 3-for-3 in primaries

• Revenue option referendum results (since November 2007)

With revenues falling short of already low expectations, the majority of North Carolina counties are slashing services and positions and dipping into fund balances to avoid property tax increases. Voters in Duplin, New Hanover and Onslow counties on May 4 decided to give their commissioners some flexibility in taxing authority by approving quarter-cent sales tax referendums.

Since counties were granted the local option by the General Assembly in 2007, 15 counties – including seven of the past nine that have held a referendum – have received voter authorization to implement the tax.

Onslow County, which had previously held the referendum in May and November 2008, saw its sales tax referendum pass with an overwhelming 70 percent of the vote. The county used a multi-platform education campaign about the tax to get word out to citizens about the planned uses for the tax revenues – fund school capital needs and public safety, and avoid property tax increases.

With the support of allies such as the Board of Realtors and the Jacksonville/Onslow Chamber of Commerce, commissioners advertised on television, radio and billboards and in newspapers. The quarter-cent sales tax is estimated to generate $4 million annually for the county.

In New Hanover County, the referendum earned the approval of almost 52 percent of voters. It was the county's first attempt to gain voter approval for the additional sales tax, which is estimated to bring an additional $5 million in revenue for the county in 2010-11.

Commissioners lobbied for sales tax approval in order to help avoid drastic cuts to services such as libraries, parks, senior services and the popular Cape Fear Museum and Arlie Gardens. The county received a boost in its quest in the form of a positive newspaper editorial that ran in the Sunday, May 2, edition of the Wilmington Star News, and benefited from the support of community groups such as the Board of Education and the Chamber of Commerce.

The Duplin County Board of Commissioners in March supported a request by county fire departments that revenues from the tax would be distributed equally among all fire departments to fund trucks, equipment, fuel and insurance.

The county was unsuccessful in gaining the tax two years ago, but this time received more than 55 percent of the votes in support of the additional tax.

"These results show that citizens understand the dire situation many county budgets are in," said NCACC Executive Director David F. Thompson. "With county sales tax revenues declining and property values decreasing, many counties are facing tough choices about whether to cut services and employees or raise property taxes. This additional revenue source will help these counties avoid significant reductions in services and may help them avoid a property tax increase."

Overall, county revenues in 2009-10 are expected to come in about half a billion dollars less than in 2008-09, according to a recent survey of county budgets conducted by the NCACC. To manage the shortfall, counties have taken a variety of steps, including cutting services, reducing staff, instituting mandatory furloughs for employees and appropriating fund balance.

"Given the state of the economy the past two years, and that the recovery seems to be coming very slowly, counties need this revenue flexibility more than ever before," said Thompson.

If each Board of Commissioners in Duplin, New Hanover and Onslow counties adopts a resolution to implement the tax, the sales tax rate in each county will increase to 8 percent. The local portion of that rate would be 2.25 percent.

The earliest the three counties can begin collecting the tax is January 2011. The General Assembly may consider legislation during the 2010 short session that would allow the counties to begin collecting the revenues Oct. 1, 2010.

The previous four counties to see the quarter-cent sales tax referendum pass – Hertford, Lee, Randolph and Rowan – will begin collecting the additional sales tax on July 1. The other counties with the additional quarter-cent sales tax are Alexander, Catawba, Cumberland, Haywood, Martin, Pitt, Sampson and Surry.

The Association's priority goal for the 2009-10 biennium is to "seek legislation to allow all counties to enact by resolution or, at the option of the Board of Commissioners, by voter referendum any or all revenue options from among those that have been authorized for any other county, including local option sales taxes, prepared food taxes, impact fees and real estate transfer taxes; and to preserve the existing local revenue base."