Options being studied in wake of state budget bill passed this week
By Kirk Ross
Staff Writer
Orange County commissioners say they’ll take a good, long look at how the recently passed state budget will affect the county’s bottom line before proposing any new taxes, but a majority of the board is at least philosophically in support of a 0.4 percent land transfer tax.
The transfer tax and a quarter-cent sales tax are two options the state gave counties in the new budget to help make up for money taken away from counties as part of a deal to turn responsibility for paying for Medicaid over to the state.
As part of a complex phase in the new system, counties lost state-supplied school construction money this year and will lose some sales tax revenue in coming years as a result of the budget deal.
County budget director Donna Coffey said a preliminary look at how the state budget will affect the county shows a loss of about $475,000 in public school construction financing and a $500,000 “hold harmless†gain as the state assumes the county’s previous share of Medicaid payments.
“It’s pretty much a wash,†she said, adding that she’s researching whether the state will dip into the construction fund in subsequent years, along with how the loss of sales tax revenue will be phased in.
She’s also asked county department heads to review how any other items in the budget might affect their areas.
“A lot of times it’s ‘the state giveth and the state taketh away,’†she said.
To make up for a loss of sales tax revenue, the state has enabled counties to hold referendums to get approval from voters for either the quarter-cent sales tax or the transfer tax.
An estimate by the North Carolina Association of County Commissioners shows Orange County gaining roughly $4 million each year from the transfer tax and $3 million from the sales tax.
Commissioner Alice Gordon said she is generally supportive of a transfer tax.
“Of the two, the land transfer tax is less regressive,†she said. And with pressing school construction and renovation costs, the county, she said, will need to have another source of revenue.
In his recently released monthly newsletter, Commissioner Mike Nelson said he would prefer the transfer tax option for the same reason.
But commissioners say they’d like to have a solid analysis before stepping into what has been a highly charged and well-funded political debate over the transfer tax.
Commissioner Barry Jacobs said that he’s in support of the idea of a transfer tax but has a lot of questions about the timing of the referendum. He’d like to know if the sales tax applies to food. If it doesn’t, he said, then it might be worth a closer look.
Commissioners, he said, are considering whether they want to call a special meeting to consider the options. As well as looking at how it will affect the budget, Jacobs said, consideration of a transfer tax might also depend on what other counties are doing. If Orange County is the only county or one of a small number of counties applying the transfer tax, it might face intense opposition from the same groups that opposed it in the legislature.
Board of commissioners chair Moses Carey said he’s cautious.
“We need to look at the options and look at the real impacts,†he said.