Five counties see sales tax approved by voters

By Todd McGee
Communications Director

While the defeat of land transfer tax referendums in North Carolina garnered headlines in early November, often overlooked was the fact that voters in Catawba, Martin, Pitt, Sampson and Surry counties passed local-option sales tax referendums.

“The additional revenue will help these counties distribute the burden of paying for growth and infrastructure needs by giving them a more diversified revenue stream,” said Association Executive Director David F. Thompson. “In 2007-08, 48 counties, representing nearly 70 percent of our state’s population, raised their property tax rate – the real home tax. Counties are seeking alternative revenues so that we can lessen the need for continual property tax increases.”

Voters in Catawba, Martin, Pitt and Sampson counties overwhelmingly approved the measures, while Surry eked out a close victory that wasn’t decided until a handful of provisional ballots were added. Measures were narrowly defeated in Greene, Columbus and Cumberland counties. In unofficial results, Greene’s effort lost by 33 votes, while Columbus came up 151 votes short.

Several counties that were successful had been making their case for local-option sales taxes well before the General Assembly actually gave counties the ability to implement the quarter-cent increase. Officials in these counties said that citizens understood their needs because they had already been advocating for additional revenues as an alternative to increased property taxes.

Sampson County Manager Scott Sauer credited a unified front in his county. Sauer said that the Board of Commissioners and both school boards (Sampson County and Clinton City) supported the measure, as did the eight municipalities in the county.

“The credit goes to the Board of Commissioners and the two boards of education for their work starting several years ago developing a capital program and putting the word out that we needed to build schools,” Sauer said. “At the same time, we needed to build a jail, and we had some other county facilities that were going to be under construction. In order to accomplish everything in the plan, it was $135 million.”

Sauer said the county adopted its capital plan in 2005 and had spent the past two and a half years educating citizens about the county’s needs. Once the General Assembly granted counties the revenue authorities in late July, the county immediately ramped up its public information efforts, printing a brochure explaining the needs and distributing it to churches and stores throughout the county. The county also inserted copies of the brochure in the payroll envelopes of county employees and school system employees the week before the election.

The county had identified early on that it would require an eventual increase of 30 cents in the property tax rate to meet all the needs.

The quarter-penny sales tax will generate roughly $911,000 a year for the county, which equates to about 3 cents on the property tax rate. Sauer says the additional revenue, along with the Medicaid relief and the county’s share of lottery proceeds will help reduce the overall property tax increase need to about 21 cents.

“At budget hearings over the last four to five years, citizens would ask, ‘why can’t you give some relief to the property tax?’ There’s never been a doubt that any additional revenue source or Medicaid cost avoidance would be programmed into our debt service,” Sauer said.

Catawba County asked for a 1-cent local-option tax earlier this summer after the county identified a series of capital projects that would have resulted in a 9-cent property tax increase. The quarter-cent sales tax is estimated to generate more than $5 million for the county, the equivalent of a 3.6 cent property tax increase.

A citizens group, Catawba County Citizens for Tax Fairness, raised some funds and hired a consultant to lead a public information campaign. The committee raised public awareness of the needs for the new revenue by sending out a series of mailings to likely voters explaining how the money would be used and what are the alternatives for generating the necessary revenue (i.e. higher property taxes). The initiative passed by almost a 3-1 margin.

“We knew it was going to take an educational campaign,” said Catawba County Chair Kitty Barnes. “There were three mailings that went out, and they were very targeted. They didn’t go to every single citizen. They went to those who were most likely to vote. We were also good to get out to any group who would have any one of us come speak.”

Pitt County leaders had been advocating for a local-option sales tax for education for three years, said County Manager Scott Elliott. So when the General Assembly’s budget included the sales tax option, the county swung into high gear.

Elliott said that when the county first considered the idea three years ago, it reached out to the school board, the community college board and the chamber of commerce. All three entities supported the need for a local-option sales tax and formed a group called STAC – Sales Tax Advocacy Committee.

That group was eventually transformed into a citizens group called CFEC – Citizens For Education Construction. This group raised more than $13,000 between the time the state budget was adopted and the Nov. 6 election, Elliott said. The group purchased ads in local media, distributed yard signs, put up a Web site (www.cfec.info) and formed a speaker’s bureau that sent representatives to speak to any citizens group that requested one.

Martin County took a different approach, said County Manager Russell Overman. County commissioners did not specify how the funds would be used, but focused on the overall needs of the county, including education. Citizens trusted the commissioners to use the extra funds wisely and passed the measure with nearly 60 percent voting for.

It was a white-knuckle affair in Surry County, as the final results were not announced until two days after the election. Surry County Manager Macon Sammons went to bed Tuesday night thinking the county had a comfortable lead of 66 votes. But when he awakened on Wednesday, he was greeted with the news that a tabulating error had occurred and the county’s margin was down to 16 votes, with the status of 47 provisional votes still yet to be determined.

The Board of Elections met on Friday to review the provisional votes and wound up disqualifying nine. Of the remaining 38, 24 were for the sales tax and only 14 against, giving the county a final lead of 26 votes.

Eleven counties exclusively pursued the land transfer tax option but none were successful. Five counties put both options on the ballot, and voters rejected both in all five counties.

“This is going to be an ongoing process,” Thompson said. “It is difficult to educate the voters about the needs in a local community in such a short time frame, but this was not a one-shot deal. Our research has shown that many communities around the country that had a successful referendum to implement a land transfer tax or an additional sales tax had to take it to the voters more than once before it was approved. County commissioners will continue to do what they feel is best for their communities and will continue to ask the citizens how they feel is the best way to pay for their needs.”

The General Assembly granted counties additional revenue authorities to help them deal with future needs caused by our state’s rapid population growth and as a way to relieve pressure on the property tax. The 2007-09 state budget included two local-option revenues for counties – a quarter-cent sales tax increase or a 0.4 percent land transfer tax. A county can only enact one option, and whichever option a county chooses must first be approved by the public via a referendum.

As of early November, 10 counties had announced they will pursue revenue options in 2008. Alexander County will try for a quarter-cent sales tax in January. Caswell, Duplin, Edgecombe, Lee, Nash, Onslow, Orange and Pamlico will seek either or both of the sales tax or 0.4 percent land transfer tax in May. Polk will try for the land transfer tax in November.

Counties that were not successful this time may also choose to try again.

North Carolina is in the midst of a population explosion that will see the state’s population grow from approximately 8 million in 2000 to more than 12 million by 2030, according to projections from the U.S. Census Bureau. These new residents are already straining existing public infrastructure, such as schools, water and sewer, and jails.

A 2006 survey by the Department of Public Instruction revealed approximately $9.8 billion of public school capital needs over the next five years. The drought has strained water supplies in many counties that are already struggling to keep up with the demands for fresh water.

For 2007-08, 48 counties representing more than two-thirds of the state’s population raised property taxes, the largest number of counties with an increase in a single year in at least five years. In 2005-06, 45 counties raised property taxes, including 19 that saw increases of 10 percent or greater.