HomeMy WebLinkAboutAgenda - 04-17-2012 - 7a REVISED 4/17/12 1
Abstract—See Bold on Pages 2 &3
Updated Attachments/Charts—Pages 5-7
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 17, 2012
Action Agenda
Item No. �-q
SUBJECT: Sales Tax Distribution Method for Fiscal 2012/2013
DEPARTMENT: Financial Services PUBLIC HEARING: (Y/N) No
ATTACHMENT(S): INFORMATION CONTACT:
Attachment 1. Property Tax Levies for Clarence Grier, (919) 245-2453
2011-2012 (Preliminary Michael Talbert, (919) 245-2308
Orange County Levies)
Attachment 2. Orange County Sales Tax
Distribution Options 2011-
2012
Attachment 3_ Property Tax Rate Impact
by Local Government of
Change in Sales Tax
Distribution
PURPOSE: To review Sales Tax Distribution Options and to consider options for the Orange
County distribution of local option sales tax for fiscal year 2012/2013.
BACKGROUND: The Board of County Commissioners was first granted the option of a 1 cent
Local Government Sales and Use tax by the General Assembly in 1971. Article 39, which
allows the County to levy the tax, also spells out two different options for the County to select
for distribution of the funds between the County and municipalities. This distribution option not
only applies to the original 1 cent sales and use tax, but to all local government sales and use
tax levied in Orange County.
The first option is to distribute the sales tax collected based on population. The formula takes
the County's population and adds all individual municipal populations. The percent of each
individual municipalities population divided by that grand total is used to allocate the sales tax
revenue. This method has been used by Orange County for at least the last 20 years.
The second option is to distribute the sales tax collected based on the Ad Valorem Property Tax
Levied by each taxing unit of local government. Attachment 1 lists the 2011-2012 Property Tax
Levies by taxing unit of local government furnished by the North Carolina Department of
Revenue. Orange County is the taxing unit of local government for not only Orange County, but
for all special tax districts located in Orange County.
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The NC General Statutes give the Board of County Commissioners the option of changing
distribution methods each year as outlined in General Statutes 105-472.b. below:
"The board of county commissioners in each taxing county shall, by resolution adopted during
the month of April of each year, determine which of the finro foregoing methods of distribution
shall be in effect in the county during the next succeeding fiscal year. In order for the resolution
to be effective, a certified copy of it must be delivered to the Secretary in Raleigh within 15
calendar days after its adoption. If the board fails to adopt a resolution choosing a method of
distribution not then in effect in the county, or if a certified copy of the resolution is not timely
delivered to the Secretary, the method of distribution then in effect in the county shall continue
in effect for the following fiscal year. The method of distribution in effect on the first of July of
each fiscal year shall apply to every distribution made during that fiscal year."
Attachment 2 provides an estimate of sales tax revenues distributed within Orange County by
municipality. Under option one, only the County and cities and towns receive sales tax revenue.
Under option two, in addition to the County, cities & towns, all special tax districts also receive
Sales tax revenues. Each year population figures used in this distribution method are based on
the most recent annual estimates of population as certified to the Secretary of Revenue by the
Office of State Budget. Attachment 2 shows an increase in population of 2,053 for Orange
County while Carrboro, Durham, and Hillsborough all show a decrease in population. This
change increases the County's share of property tax distributed based on population from
61.46% in fiscal year 2010/2011 to 62.04% in fiscal year 2011/2012.
The Board of Commissioners has finro different methods available to distribute sales tax
revenue and each has distinct advantages and disadvantages to the County. There are no new
revenues created. The two options are different methods to distribute existing sales tax
revenues.
CURRENT SITUTATION: Orange County has used the Population Method for the distribution
of sales tax revenues for at least the last 20 years. If the Board wishes to change the method of
distribution, the Board of County Commissioners shall adopt by resolution, during the month of
April, the method of distribution of sales tax revenues that shall be in effect for the next fiscal
year. If the Board fails to adopt a resolution changing the method of distribution, the method of
distribution currently in effect shall continue for the following fiscal year.
FINANCIAL IMPACT: Attachment 3 estimates the property tax rate impact on local
governments of a change from a Population based distribution to the Property Tax Levy
method. If the Board of County Commissioners were to adopt the Ad Valorem Property Tax
Levy distribution option for local option sales tax, it would have a negative material impact on all
cities and towns. The County and all special taxing districts would benefit from the change at
the expense of the cities and towns with the exception of Durham. As of April 5, 2011 the
County increase in revenues was estimated to be $874,082 if the County changed to the Ad
Valorem Property Tax Levy distribution option for local option sales tax and as of April 17,
2012 the increase is $605,576. The decrease of $268,506 from fiscal year 2010/11 to fiscal
year 2011/2012 is mainly due to changes in state certified population figures shown on
Attachment 2.
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Estimated amounts of revenues gained by the County & Special Taxing Districts:
o Orange County $ 605,576
o Chapel Hill Carrboro City Schools $2,243,909
o All Fire Districts $ 463,584
o Chapel Hill Downtown Service District $ 27,424
o Durham $ 2,344
Estimated amounts of revenues lost by the Cities & Towns:
o Carrboro $ 884,711
o Chapel Hill $2,235,750
o Hillsborough $ 147 299
,
o Mebane $ 75,077
State law currently provides only finro options for the County to select. Some counties have
successfully sought additional options that allow balance between the finro existing options.
There are also counties that have agreements (Memoranda of Understanding) with their local
municipalities that provide for a compromise position befinreen the finro existing options.
If the County changed from the `Population' to the `Ad Valorem' option, it gains $717,977 and
the towns give up $3,467,248.
Using a cost sharing arrangement befinreen the towns to make the County whole based upon
the percentage of sales taxes each town receives would provide the following impacts:
Orange County $ 605,576 Increase
Chapel Hill (66.41%) ($402,155) Decrease
Carrboro (23.93%) ($144,890) Decrease
Hillsborough ( 7.44%) ($ 45,040) Decrease
Mebane ( 2.19%) ($ 13,270) Decrease
Durham ( 0.04%) ($ 221) Decrease
Certainly, no municipality desires a change from the current method selected by the County for
sales tax distribution which would reduce their sales tax revenues. However, each municipality
also remains at risk that the County might one day in the future select the other available option.
Each year a future Board of County Commissioners will decide this issue within the authority
granted by State law. There is an effort within the NC General Assembly (a NC Municipal
League legislation goal) to put further limits on a County's ability to make this decision in the
future.
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RECOMMENDATION(S): The Manager recommends that the Board consider both options for
the distribution of sales tax revenues and provide direction to staff for the distribution of local
option sales tax for fiscal year 2013/2014.
Growth management practices and a lack of utility infrastructure in the rural (non-municipal)
areas of Orange County ensure that the `Population' method of sales tax distribution will always
benefit the municipalities. As urban centers intensify density and sales tax revenues grow, the
disparity between the finro formula options will increase.
Orange11 April 4, 2012
Attachment 1
2011-12 AD VALOREM PROPERTY TAX LEVIES
PRELIMINARY ORANGE COUNTY LEVIES
School Special Total Percent of
Levy Districts Districts Levy Total Levy
[$1 I$l I�I
Orange County 136,382,728 19,260,309 3,979,116 159,622,153 75.4874
Carrboro 11,611,958 0 0 11,611,958 5.4914
Chapel Hill:
in Orange County 34,116,234 0 235,387 34,351,621 16.2453
Durham:
In Orange County 49,416 0 0 49,416 .0234
Hilisborough 4,705,799 0 0 4,705,799 2.2254
Mebane:
In Orange County 1,114,495 0 0 1,114,495 .5271
Total $187,980,630 $19,260,309 $4,214,503 $211,455,442 100.0000
Note: Figures shown are preliminary and subject to change. '
Final reports will be available July 2012.
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Attachment 2
Option 1 - Based on Population
Existing 2011/2012 Sales Tax Distribution
Based on Population
Population (1) Change
FY2010/11 FY2011/12
Orange 132,272 134,325 2,053 62.03930%
Carrboro 19,991 19,665 (326) 9.08247%
Chapel Hill 54,431 54,582 151 25.20922%
Durham 52 30 (22) 0.01386%
Hiilsborouc 6,751 6,113 (638) 2.82335%
Mebane 1,790 1,801 11 0.83181%
215,287 216,516 1,229 100.0000%
Orange County Budget
Estimated Total County& Municipal Distribution
(1) Each year population figures used in this distribution method are based on the most recent annual estimates of
population as certified by the Secretary of Revenue by the Office of State Budget
Option 2 - Based on
Ad Valorem Tax Levy
Sales Tax
Ad Valorem Estimated Increase
Tax Levy 2011/2012 Percent Budget 2011/2012 (Decrease)
Orange $ 136,382,728 64.4971% $ 15,889,176 $ 605,576
Carrboro CH Schools $ 19,260,309 9.1084% $ 2,243,909 $ 2,243,909
Fire Districts $ 3,979,116 1.8818% $ 463,584
Carrboro $ 11,611,958 5.4914% S 463,584
$ 1,352,843 $ (884,711)
Chapel Hill $ 34,116,234 16.1340% $ 3,974,688 $(2,235,750)
Chapel Hill Down Town $ 235,387 0.1113% $ 27,424 $ 27,424
Durham $ 49,416 0.0234% $ 5,757 $ 2,344
Hillsborough $ 4,705,799 2.2254°/a $ 548,246 $ (147,299)
Mebane $ 1,114,495 0.5271% $ 129,843 $ (75,077)
$ 211,455,442 $ 24,635,471
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Attachment 3
Property Tax
Impact by Local Government 2011/2012
of Change in 2011/2012 Property Tax Property Tax Rate Increase Adjusted
Sales Tax Distribution Property Tax Revenue From (Decrease) Likely Property Tax
Rate in Cents One Cent For Distribution Change Rate in Cents
In Cents
Orange County 85.80000 $ 1,535,967 (0.3943) 85.40574
Carrboro CH Schools 18.84000 $ 987,247 (2.2729) 16.56710
Fire Districts
Cedar Grove 7.36000 $ 27,482 (0.6927) 6.66733
Chapel Hill 7.50000 $ 230 (0.9926) 6.50741
Damascus 5.00000 $ 9,147 (0.6386) 4.36143
Southern Triangle 5.00000 $ 33,355 (0.6372) 4.36281
Efland 4.66000 $ 66,140 (0.5653) 4.09470
Eno 5.99000 $ 72,658 (0.5784) 5.41162
Little River 4.06000 $ 41,426 (0.4908) 3.56923
New Hope 8.95000 $ 55,403 (0.7239) 8.22608
Orange Grove 4.08000 $ 75,569 (0.4327) 3.64731
Orange Rural 5.61000 $ 132,838 (0.6041) 5.00588
South Orange 7.85000 $ 54,288 (0.9782) 6.87182
White Cross 7.00000 $ 36,873 (0.6169) 6.38315
Carrboro 58.94000 $ 188,947 4.6820 63.62203
Chapel Hill 49.40000 $ 717,000 3.1181 52.51812
Chapel Hill Down Town 7.10000 $ 23,380 (1.1730) 5.92705
Durham 55.75000 $ 878 (2.6709) 53.07912
Hillsborough 62.00000 $ 73,475 2.0047 64.00471
Mebane 47.00000 $ 23,476 3.1980 50.19804
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