By Susan Dickson
Staff Writer
The Orange County Board of Commissioners voted unanimously on Tuesday to put a quarter-cent sales-tax referendum on the November ballot.
The move followed the board’s final approval of the county’s $175.3 million 2010-11 budget, which included steep cuts to county departments, nonprofit agencies and both school districts.
The budget maintains the current ad valorem-tax rate of 85.8 cents per $100 of valuation and represents a $2.3 million decrease from the $177.6 million 2009-10 budget and an $8.5 million decrease from the 2009-10 amended budget. The budget would also maintain the Chapel Hill-Carrboro City Schools special district-tax rate at 18.84 cents per $100 of valuation.
In the 2007 state budget, the legislature gave counties the option of a quarter-cent sales-tax increase or a 0.4 percent land-transfer tax to help compensate for money taken away from counties when the responsibility for paying for Medicaid was turned over to the state. As a result of that budget deal, counties lost state-supplied school-construction money and some sales-tax revenue.
Orange County voters overwhelmingly rejected a transfer tax referendum in May 2008.
“Whether we like it or not, we are in a situation where we only have a limited number of revenue sources,†County Manager Frank Clifton said. “Without additional revenues, county services are going to deteriorate at a greater rate than they have in the past.â€
If voters approve the sales-tax increase, the Orange County sales-tax rate, which would apply to all goods and services except food and medicine, will increase from 7.75 to 8 percent. The revenue from the tax increase would not be shared with the state or local municipalities. According to Clifton, the tax could generate $2.3 million annually, though revenues for fiscal year 2010-11 would be minimal.
Board members said they supported putting the sales-tax referendum on the November ballot as an alternative revenue source to property taxes, but said they would postpone a decision on how the money would be allocated if the referendum were approved in order to give the public the chance to weigh in on that decision.
Several board members indicated they would like to see the money go toward economic development.
“I think we have to diversify our revenues,†Commissioner Bernadette Pelissier said, adding that she would like to see the county dedicate at least some of the revenues to economic development.
Commissioner Mike Nelson said that while he was “not a big fan†of the sales tax, he would be willing to put the option on the ballot to let the voters decide.
“The vicious cycle that we’re in is that we don’t have good strong economic development here,†he said.
Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, said he had spoken with a number of retailers who did not support the sales-tax increase, though they would have supported when the option was first presented two years ago.
“This is a slightly different economic time, and I do think it will take a concerted effort to get the voters to vote for it,†he said. “It is only with the promise to dedicate the funds to economic development that you could earn our board’s support.â€
Board members mentioned economic development, debt service, schools and libraries as things they would like to fund with the sales-tax revenues.