HomeMy WebLinkAboutAgenda - 08-21-2007-6bORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: August 21, 2007
Action Agenda
Item No. Co' b
SUBJECT• Local Revenue Options Authorized by General Assembly
DEPARTMENT: Budget
PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
NCACC Frequently Asked Questions
Regarding New County Authority
Referenda
INFORMATION CONTACT:
Laura Blackmon, (919) 245-2300
Donna Coffey, (919) 245-2151
PURPOSE: To allow the Board of County Commissioners an opportunity to discuss and
decide upon its intent for enacting the County's local revenue options recently
authorized by the General Assembly.
BACKGROUND: Local governments in North Carolina have historically relied heavily
upon ad valorem property taxes as their major source of revenue. For example, in the
current 2007-08 fiscal year property tax revenues total $119,946,105 or 69 percent of
Orange County's total General Fund budget of $173,624,351. The County's approved
tax rate equals 95 cents. per $100 of property valuation; and each penny collected in
property tax generates $1,247,881.
For a number of years, the Orange County Board of County Commissioners, the North
Carolina Association of County Commissioners and many other Boards across the
state, have lobbied the General Assembly for legislative authority to expand counties'
revenue options lessening counties' reliance on property taxes. With the recently
approved 2007-09 State biennium budget, the North Carolina General Assembly
granted counties the choice of enacting a .4% land transfer tax or an additional '/4-cent
sales tax. Enactment of either of these taxes requires voter approval. The ballot can
include referenda for both the land transfer tax and the '/4-cent sales tax. Should both
referenda pass, Commissioners would have to choose which one to authorize - a
County cannot enact both revenues and cannot enact either without voter approval.
Current Year Options for Seeking Voter Approval
During the current fiscal year, two elections are planned for Orange County -November
6, 2007 and May 6, 2008.
~: November 6, 2007 Election Date -The November 6 election is a municipal
election meaning that only the voting precincts located within municipal
boundaries are scheduled to be open. Since the local option revenues question
is a countywide referendum, the Board of Elections would need to open and staff
all voting precincts within the county for a revenue options item to be part of the
November 6, 2007 election.
According to Board of Elections Director, Barry Garner, it is preferred that
Commissioners make a decision regarding a possible November 6 local revenue
option referendum on August 21 to allow maximum time to prepare for the
election addition. However, should Commissioners need additional time to
finalize their decision, it is imperative that the Board make a decision no later
than September 4, 2007 if the election is held on November 6. This would allow
sufficient time for the Board of Elections to have ballots printed and prepare for
staffing voting precincts outside of the municipal boundaries.
Effective Date of Local Revenue Options if Voters Approve Referendum on
November 6, 2007
0 1/4 Cent Sales Tax -April 1, 2008 is the earliest date that the sales tax
could become effective if Commissioners levied the sales tax via
resolution following a November referendum.
o .4% Land Transfer Tax -Voter approval of the Land Transfer Tax on
November 6, 2007 would permit a January 1, 2008 effective date so long
as the resolution levying the tax were adopted in November.
-~. May 6, 2008 Election Date -The May 6, 2008 is the date of the statewide
primary and the date of the primary for members of the Board of County
Commissioners. Therefore, voting precincts across the county will be open to
voters.
Effective Date of Local Revenue Options if Voters Approve Referendum on
May 6, 2008
Should the Board receive voter approval of the new local revenue options on
May 6, 2008, Orange County would not receive any proceeds in the current
fiscal year from enacting the new funding sources.
0 1/4 Cent Sales Tax -The sales tax may become effective on the first day
of any calendar quarter so long as the county gives the Secretary of
Revenue at least 60 days advance notice. Therefore, September 1, 2008
is the earliest date that the sales tax would become effective if
Commissioners levied the sales tax via resolution following a May 2008
referendum.
o .4% Land Transfer Tax -The tax may become effective only on the first
day of a calendar month set in the resolution levying the tax, which may
not be earlier than the first day of the second succeeding calendar month
after the adoption of the resolution (following the referendum). Therefore,
should Commissioners receive voter approval of the Land Transfer Tax on
May 6, 2008; the effective date of the tax would be July 1, 2008.
Since the General Assembly's approval of the revenue options happened less than 30
days ago, most counties across the state are in the process of deciding their next steps
with regard to the new revenue options and have not made final decisions. The
Manager plans to attend a Manager's update on the local revenue options on August
17, 2007 where additional information regarding which option other .counties are
choosing to enact will be available. The Manager will provide information collected at
that meeting to the Board during the August 21 meeting.
The North Carolina Association of County Commissioners recommends that counties
undertake a public education campaign to educate voters on the revenue options.
County staff envisions the education initiative to be similar to those the County has
undertaken for past voter approved bond referenda. The Manager is prepared to
convene County staff to begin an education initiative as soon as the Board finalizes its
decision on the local revenue options.
FINANCIAL IMPACT: According to projections generated by the North Carolina
Association of County Commissioners, a .4% land transfer tax would generate just over
$4 million annually while a '/4-cent sales tax increase would produce just over $3 million
per year. There are no restrictions on the use of either of these revenues.
During the budget planning process this spring, staff anticipated that there would be a
statewide bond this fall and that we would need to open the non-municipal sites, so
those costs are included in the Board of Elections 2007-08 fiscal year budget.
However, since the General Assembly did not authorize a statewide bond before
recessing this summer the funds originally budgeted for this purpose will not be spent
unless Commissioners choose to conduct a revenue options referendum on November
6, 2007. The anticipated cost to open the non-municipal sites totals $27,200 and is
included in the 2007-08 Board of Elections budget.
The May 6, 2008 election is a statewide election meaning that we have budgeted for all
precincts in the County to be open -thereby the County will not incur additional costs
for opening all precincts.
RECOMMENDATION(S): The Manager recommends that the Board of County
Commissioners provide direction to~ staff on proceeding with enactment of the local
revenue options.
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Frequently Asked Questions regarding new county
authority referenda
Page 1 of 2
The 2007 State Appropriations Act (H1473) provides counties with the authority to levy
either a land transfer tax (up to 0.4 percent) or a local sales tax (0.25 percent),
following approval in anon-binding advisory referendum. H1473 creates two new
articles under G.S. 105 -Article 60 for the local option land transfer tax (H1473
SECTION 31.17.(a)), and Article 46 for the local option '/ cent sales tax (H1473
SECTION 31.17.(b)).
Question: Can a county hold an advisory referendum on the new revenue authority
on the ballot of the municipal elections to be held this fall?
Answer: Yes, as long as the county is a "November" county in the upcoming
municipal elections, and the county notifies the State Board of Elections of its intent to
include the advisory referendum on the ballot no later than Sept. 4, 2007 (according to
Director of the State Board of Elections). If the county is an "October" county
(approximately 20 counties), it is too late to get the advisory referendum on the
municipal election ballot. Please confer with the State Board of Elections and your
local board of elections to determine whether you are an "October" or "November"
county.
Question: What are the steps a county needs to consider when scheduling a
referendum?
Answer: Any county that is subject to Section 5 of the Voting Rights Act of 1965 will
need to submit its request for pre-clearance no later than Aug. 31, 2007. The State of
North Carolina has already submitted its request for pre-clearance of the authorizing
legislation to the U.S. Attorney General.
All counties must contact their local board of elections and the State Board of
Elections in order to have the advisory referendum included on the ballot. See
Question #1 for deadlines.
If a county is unable to get the advisory referendum on the ballot, it may call for and
hold a special election. The special election may not be held within the period of time
beginning 30 days before and ending 30 days after the date of any other primary,
election, special election or referendum.
Question: Can the ballot include advisory referendums for both the land transfer tax
and the quarter-cent sales tax?
Answer: Yes -both are authorized under state law. If both referenda pass, then the
Board of Commissioners would have to choose which one to authorize, if they so
desired. They cannot enact both.
Question: Must the Board of County Commissioners levy a tax if the voters approve a
referendum for either the local option transfer tax, sales tax or both?
Answer: A Board of County Commissioners is not obligated to levy a tax if the
majority of those voting in a referendum on either the land transfer tax or sales tax
vote in support of a levy.
Question: Can a county stipulate uses of the monies on the ballot as a part of the
referendum? Answer: A county may not stipulate the use of the money on the ballot.
Question: Is there a prescribed format for the question of the ballot?
Answer: Yes. Legislation specifies how the question must be presented on the ballot:
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NCACC
Page 2 of 2
0
Land Transfer:
Ballot Question -The form of the question to be presented on a ballot for a
special election concerning the levy of the tax authorized by this Article shall
be: '[ ]FOR [ ]AGAINST
Real property transfer tax at the rate of up to [X] percent [X%] of value or
consideration.'
Note: The land transfer tax amount can be set at a rate up to .4%, in
increments of .1%.
Sales Tax:
Ballot Question. -The form of the question to be presented on a ballot for a
special election concerning the levy of the tax authorized by this Article shall
be: '[ ]FOR [ ]AGAINST
Local sales and use tax at the rate of one-quarter percent (0.25%) in addition
to all other State and local sales and use taxes.'
Note: The sale tax amount is set at a rate of .25%.
Question: When is the earliest the sales tax will become effective if the Board of
County Commissioners levies the sales tax via resolution (following a referendum)
during November 2007?
Answer: April 1, 2008, so long as the resolution levying the tax is adopted in
November 2007. The sales tax may become effective on the first day of any calendar
quarter so long as the county gives the Secretary of Revenue at least 60 days'
advance notice.
Question: When is the earliest the land transfer tax will become effective if the Board
of County Commissioners levies the land transfer tax via resolution (following a
referendum) during November 2007?
Answer:. Jan. 1, 2008, so long as the resolution levying the tax is adopted in
November 2007. The tax may become effective only on the first day of a calendar
month set in the resolution levying the tax, which may not be earlier than the first day
of the second succeeding calendar month after the resolution is adopted.
Question: Are there restrictions on the use of either of the new local option tax
revenues?
Answer: Land transfer tax revenues are expressly authorized to be used for any
lawful purpose. The sales tax is not restricted or earmarked.
Question: If the referendum fails, can a county hold a subsequent referendum on the
same question, and if so, must a county wait a certain period of time prior to holding
another referendum?
Answer: Per Gerry Cohen (N.C. General Assembly Bill Drafting), there are no
restrictions on resubmitting a land transfer tax or the new quarter-cent sales tax to the
voters again if it has failed.
As with any local legal matter, we ask that you consult with your county attorney and
county board of elections as you .consider these local referendum options.
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