HomeMy WebLinkAboutAgenda - 04-23-2013 - 7dORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 23, 2013
Action Agenda
Item No. 7 -d
SUBJECT: Sales Tax Distribution Method for Fiscal Year 2013/2014
DEPARTMENT: Financial Services PUBLIC HEARING: (Y /N) No
ATTACHMENT(S):
Attachment 1. Property Tax Levies for
2012 -2013 (Preliminary
Orange County Levies)
Attachment 2. Orange County Sales Tax
Distribution Options 2012-
2013
Attachment 3. Property Tax Rate Impact
by Local Government of
Change in Sales Tax
Distribution
INFORMATION CONTACT:
Clarence Grier, (919) 245 -2453
PURPOSE: To review Sales Tax Distribution Options and to consider options for the Orange
County distribution of local option sales tax for fiscal year 2013/2014.
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 21 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 2012 -2013 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.
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 two 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 1,451 for Orange
County while Carrboro, Durham, and Hillsborough all show a slightly lower increase in
population than the County as a whole. This change decreases slightly the County's share of
property tax distributed based on population from 62.04% in fiscal year 2011/2012 to 62.01% in
fiscal year 2012/2013.
The Board of Commissioners has two 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 21 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, 2013, the County
increase in revenues was estimated to be $605,576. If the County changed to the Ad Valorem
Property Tax Levy distribution option for local option sales tax, the increase as of April 23, 2013
is $1,053,217. The increase of $447,641 from fiscal year 2011/12 to fiscal year 2012/2013 is
mainly due to changes in state certified population figures shown on Attachment 2, and
increased distributions received due to the recovering local economy.
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Estimated amounts of revenues gained by the County & Special Taxing Districts:
o Orange County $ 1,053,217
• Chapel Hill Carrboro City Schools $ 2,537,681
• All Fire Districts $ 478,995
• Chapel Hill Downtown Service District $ 29,842
• Durham $ 1,892
Estimated amounts of revenues lost by the Cities & Towns
• Carrboro
$ 907,823
• Chapel Hill
$ 2,988,589
• Hillsborough
$ 117,094
• Mebane
$ 88,120
State law currently provides only two options for the County to select. Some counties have
successfully sought additional options that allow balance between the two existing options.
There are also counties that have agreements (Memoranda of Understanding) with their local
municipalities that provide for a compromise position between the two existing options.
If the County changed from the `Population' to the `Ad Valorem' option, it gains $1,053,217 and
the towns give up $4,101,626.
Using a cost sharing arrangement between the towns to make the County whole based upon
the percentage of sales taxes each town receives would provide the following impacts:
Orange County
$1,053,217
Increase
Chapel Hill
(67.55 %)
($711,493)
Decrease
Carrboro
(22.95 %)
($241,683)
Decrease
Hillsborough
(7.31%)
($ 76,965)
Decrease
Mebane
( 2.15 %)
($ 22,695)
Decrease
Durham
( 0.04 %)
($ 381)
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 two formula options will increase.
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Attachment 1
2012 -13 AD VALOREM PROPERTY TAX LEVIES
PRELIMINARY ORANGE COUNTY LEVIES
Total $189,874,966 $19,415,346 $3,893,021 $213,183,333 100.0000
Note: Figures shown are preliminary and subject to change.
Final reports will be available July 2013.
School
Special
Total
Percent of
Levy
Districts
Districts
Levy
Total Levy
[$l
[$l
[$l
Orange County
137,849,317
19,415,346
3,664,706
160,929,369
75.4887
Carrboro
12,190,493
0
0
12,190,493
5.7183
Chapel Hill:
In Orange County
33,469,709
0
228,315
33,698,024
15.8071
Durham:
In Orange County
44,640
0
0
44,640
.0209
Hilllsborough
5,198,081
0
0
5,198,081
2.4383
Mebane:
In Orange County
1,122,726
0
0
1,122,726
.5266
Total $189,874,966 $19,415,346 $3,893,021 $213,183,333 100.0000
Note: Figures shown are preliminary and subject to change.
Final reports will be available July 2013.
6
Attachment 2
Option 1 - Based on Population
$ 137,849,317
64.6623%
18,017,581
Existing 2011/2012 Sales Tax Distribution
Carrboro CH Schools
$
Based on Population
9.1073%
2,537,681
2,537,681
Population
$
Change
1.7190%
FY2011/12 FY2012/13
478,995
Carrboro
Orange 134,325
135,776
1,451
62.00582%
Carrboro 19,665
19,905
240
9.09016%
Chapel Hill 54,582
55,176
594
25.19763%
Durham 30
31
1
0.01416%
Hillsborough 6,113
6,239
126
2.84921%
Mebane 1,801
1,846
45
0.84303%
216,516
Option 2 - Based on
Ad Valorem Tax Levy
218,973 2,457 100.0000%
Estimated Total County & Municipal Distribution
Sales Tax
Ad Valorem Estimated Increase
Tax Levy 2012/2013 Percent Budget 2012/2013 (Decrease)
Orange
$ 137,849,317
64.6623%
18,017,581
1,053,217
Carrboro CH Schools
$
19,415,346
9.1073%
2,537,681
2,537,681
Fire Districts
$
3,664,706
1.7190%
478,995
478,995
Carrboro
$
12,190,493
5.7183%
1,593,357
(907,823)
Chapel Hill
$
33,469,709
15.7000%
4,374,655
(2,988,589)
Chapel Hill Down Town
$
228,315
0.1071%
29,842
29,842
Durham
$
44,640
0.0209%
5,835
1,892
Hillsborough
$
5,198,081
2.4383%
679,415
(117,094)
Mebane
$
1,122,726
0.5266%
146,746
(88,120)
$ 213,183,333 27,864,106
100.0000%
Property Tax
Impact by Local Government
of Change in
Sales Tax Distribution
Orange County
Carrboro CH Schools
Fire Districts
Cedar Grove
Chapel Hill
Damascus
Southern Triangle
Efland
Eno
Little River
New Hope
Orange Grove
Orange Rural
South Orange
White Cross
Carrboro
Chapel Hill
Chapel Hill Down Town
Durham
Hillsborough
Mebane
Attachment 3
2012/2013
Property Tax
Rate in Cents
2012/2013
Property Tax Property Tax Rate Increase Adjusted
Revenue From ( ecrea__e ) Likely Property Tax
One Cent For Distribution Change Rate in Cents
In Cents
85.80000
$
1,535,967
( , 6 85 ,
85.11430
18.84000
$
987,247
5705`
(`` �, -�� -��
16.26954
7.36000
$
27,482
(0-1-1-11)
6.58290
7.50000
$
230
(0 98A5�
6.51546
5.00000
$
9,147
(0 633A�
4.36660
5.00000
$
33,355
(0 6320'
4.36798
4.66000
$
66,140
(0 5601
4.09928
5.99000
$
72,658
(0 5 3 7
5.41631
4.06000
$
41,426
(0 A866
3.57320
8.95000
$
55,403
( ,1 '
8.23195
5.00000
$
75,569
(0 A2 92
4.57081
5.61000
$
132,838
(0 5992
5.01078
7.85000
$
54,288
(0 9702
6.87975
7.00000
$
36,873
('0611
6.38815
58.94000
$
188,947
4.8046
63.74464
49.40000
$
717,000
4.1682
53.56819
7.10000
$
23,380
(1 2i
5.82361
56.75000
$
793
(2.3849)
54.36508
6.80000
$
73,475
1.5937
8.39366
47.00000
$
23,649
3.7262
50.72617
7