HomeMy WebLinkAboutAgenda 06-02-2026; 6-c - Update on Interlocal Agreement between County and Towns for Tax Collection 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: June 2, 2026
Action Agenda
Item No. 6-c
SUBJECT: Update on Interlocal Agreement between County and Towns for Tax Collection
DEPARTMENT: Tax Administration
ATTACHMENT(S): INFORMATION CONTACT:
Current Interlocal Agreement and Kirk Vaughn, (919) 245-2153
Addendum
Presentation
PURPOSE: To receive an update on the discussions with the towns on the current Tax Collections
Interlocal Agreement (ILA) and provide direction to staff on potential action to terminate the ILA.
BACKGROUND: In 1979 the County entered into an agreement with Chapel Hill, Carrboro, and
Hillsborough whereby the Orange County Tax Collector would, on behalf of the Towns, bill and
collect the towns' tax levies in accordance with North Carolina General Statute 160A-461.
In 2006 the agreement was updated, and the municipal tax collection rate was set at 0.5% of the
annual amount collected for each of the towns. The expiration was set not to exceed 99 years
from July 1, 2006. The agreement requires unanimous agreement from all three (3)towns to make
amendments and requires a one-year notice for termination.
Research by Tax Office staff indicates that the current 0.5% municipal tax collection rate is below
the state average. In a survey of over 25 county collection fees, the average and most common
fee from counties is 1.5% of municipal tax collection. Orange County's tax collection fee was the
lowest in the survey group.
The Board of County Commissioners has entered into an agreement with GAR Associates to
make recommendations on enhancements to the Assessment Division of the Tax Office. These
enhancements will be targeted to ensure a more equitable and better communicated revaluation
in 2029. The County would be able to utilize additional municipal funding to support the
recommendations made by the consultant and other tax office divisions enhancements.
County staff provided this information to the Board of County Commissioners in February 2026,
and received direction to communicate with staff from the three (3) entities. The County had staff-
level conversations with Carrboro and Hillsborough, as well as manager-level conversations with
Chapel Hill.
Given the limitations of the current agreement — the unanimous agreement requirement for
amendment, the 99-year term, and the one-year termination notice — County staff believe that the
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County should terminate the current agreement. This would allow the County to enter into more
limited term agreements with each municipality separately. To begin negotiations for tax collection
in the 2027-28 fiscal year, the County would need to terminate the agreement prior to June 30,
2026.
FINANCIAL IMPACT: There would be an increase in revenue generated from potential
amendments to the current ILA. The revenue accrued through new ILAs could be used to fund
recommended improvements to the Tax Office beginning in FY 2027-28. The County received
$410,000 in FY 2024-2025 from the Towns based on a 0.5% tax collection fee.
ALIGNMENT WITH STRATEGIC PLAN: This item supports:
• GOAL 6: DIVERSE AND VIBRANT ECONOMY
OBJECTIVE 3. Streamline and improve County administrative processes to facilitate
efficient and effective interactions between residents, businesses, and County
departments.
OBJECTIVE 5. Increase access to and awareness of information and assistance available
to residents and businesses through clear communication and responsive service delivery.
RECOMMENDATION(S): The Manager recommends that the Board receive the update on the
discussions with the towns, and provide direction to staff regarding potential action to terminate
the current ILA prior to June 30, 2026.
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NORTH CAROLINA
ORANGE COUNTY
This AGREEMENT,made and entered this thea day of
2006,by and among Orange County(hereinafter referred to
Co ty), Town of Carrboro, Town of Chapel Hill, and Town of Hillsborough
(hereinafter individually and collectively referred to as Town or Towns), to
provide for centralized and systemized collection of property taxes in Orange
County which will benefit the units of government contracting both in cost and
information services, the parties to this agreement,pursuant to the authority
contained in Article 20, of Chapter 160A of the North Carolina General Statutes
contract and agree as follows:
I. The County shall perform for itself and each of the Towns all of
the tax collection functions prescribed in Subchapter U of Chapter
105 of the North Carolina General Statutes (hereinafter referred to
as the Machinery Act). This activity shall hereinafter be referred to
as the joint tax collection system.
II. Effective July 1, 1978,the County tax collector began the joint
venture as tax collector for the County and each Town that is a
party to this agreement under the original interlocal agreement
signed in 1979. Reference in this agreement of"tax collector"
shall hereinafter refer to the County tax collector. The tax collector
and any deputy tax collectors shall be appointed by the County
Board of Commissioners.
III. Effective with the tax levy for the fiscal year beginning July 1,
2006 and each fiscal year thereafter so long as this contract is in
effect, and not to exceed 99 years, The governing bodies of the
County and the Towns shall adopt an order pursuant to North
Carolina General Statutes §105- 321 (b) directing the tax collector
to collect the taxes charged in the tax records and receipts. A copy
4
of this order, along with the tax receipts, shall be delivered to the
tax collector. Thereafter,the tax collector shall cause the
preparation of the tax "Scroll"and shall deliver a copy thereof to
each of the TOWNS. The Annual Settlement of the tax collector as
detailed in Sections 105-352 and 105-373 of the North Carolina
General Statutes shall be made to the governing body of the
County.
IV. Except as expressly provided herein The Orange County Board of
Commissioners shall have the sole and absolute authority to make
any and all elections, determinations and decisions for the County
and the Towns that the governing bodies of the County and each
Town are authorized to make pursuant to Articles 21, 26, 27 and
28 of Chapter 105 of the North Carolina General Statutes.
V. When taxes are paid in full,tax receipts will be marked paid as a
verification of the transaction.Partial payments may be made and
partial payment receipts shall be issued and forwarded to the
taxpayer by the tax collector. Any such partial payment shall be
identified where appropriate as to a particular parcel or tract of
land and credited as prescribed by law as to collection expense,
interest,penalty and principal and to each governing body
proportionally. Each town shall be credited by the tax collector
with that portion of the payment received that bears the same
relationship to the total amount received as the amount of taxes
owed to the Town for the property bears to the total amount of
taxes owed for the property. All tax payments received by the
Towns shall be deposited in an account designated by the County.
Processed information shall be forwarded to the County tax
collector.
VI. All tax collections that are made pursuant to the joint tax collection
system shall be deposited daily in accounts specified by the County
Finance Officer. At or before 1:00PM of the work day following
5
the collection deposit date the County Finance Office will cause
each governmental unit's share of that day's deposits to be
transferred to an account as designated by the Finance Officer of
each Town. The share of each unit shall be determined by a
computer distribution of all payments. Daily transfer information
will be provided to Carrboro,Chapel Hill, and Hillsborough by
telephone call from the County Finance Office at or before 12:00
PM on the date of transfer. The County Finance Officer will
provide monthly reports with detailed payment and distribution
information to the Finance Officer of each governmental unit.
Additionally,monthly reports will be provided which include a
listing of any changes to the levy such as discoveries and taxes
released, refunded, compromised,or in any way affected by
actions of the County Board of Commissioners, Tax Collector or
Assessor.
The County's annual audit will include an audit of the tax
collection system . Upon completion of such audit the County will
provide each Town with a separate report containing the Town's
tax levy and collection information to include the auditor's
opinion.Any special audit requests shall be directed to the County
Finance Officer and shall be paid for by the requesting unit
through a supplemental billing directed by the County to the
requesting unit.
The County will bill each Town quarterly for its services in the
operation of the joint tax collections system. This quarterly billing
for each town will be computed at a rate of 5110 (one half) of 1%
of the total taxes collected for each respective Town. Tax
collections will be based on the monthly tax levy and collection
information provided to the Towns as mentioned above. This
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change in charge of collection will take place no earlier than July
1,2007. Notification of this change will be given by January
2007. The current formula in place will remain until such change
is instituted.
The Towns will remit payment to Orange County within 30 days
of receipt of the bill from the County. To the extent that the annual
financial tax audits reveal that actual year-end collections are
different from calculated costs previously billed by the County,
adjustments will be made either by refund or invoice for final
payment no later than 45 days following the close of the fiscal year
end.
Additionally the Towns agree to a surcharge to be credited toward
the purchase and yearly maintenance of a comprehensive software
package to support and maintain the collection of revenues due.
The surcharge will be determined by staff from all jurisdictions no
later than November 30th of each year and approved by the
manager of each jurisdiction for their levied surcharge. The
surcharge will be a calculated based on agreed formula.
VII. Collection of all delinquent taxes shall be the sole responsibility of
the County. The County will use the same diligence and effort to
collect taxes owed to the Towns as it does to collect taxes owed to
the County. The County may elect to buy property at foreclosure
on the basis of sound business considerations.Nothing in this
section or agreement requires the County to purchase property at
foreclosure or otherwise in situations where the market value of the
property does not exceed the cost of extinguishing all liens on the
property at the time of sale.
VIII. Additionally, the County agrees under NCGS 153A-156 to handle
the collection and auditing of all short term lease or rentals,known
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as Gross Receipt Tax,within the County area. This includes all
three Towns, at no cost to the Towns.
IX. This agreement may be terminated at the conclusion of any fiscal
year. The governmental unit wishing to terminate the agreement
may do so only after giving each other unit of government twelve
months written notice of its decision to do so.
X. This agreement shall become effective when properly executed by
all parties pursuant to resolutions adopted by the governing boards
of each. This agreement may be amended pursuant to a resolution
properly executed by all parties and adopted by the governing
board of each party. The parties hereto have caused this agreement
to be executed in accordance with resolutions of their respective
05sai t,�♦� governing bodies,this the 3 day of 92006.
t s COUNTY OF ORANGE
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gets���� BY: J
ATTEST:
CLERK
'INN�u�rii w n r rrrrrry����ry'
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``� ••'' ••••' �' TOWN OF CARRBORO
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1911 • BY:
MAYOR
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LERK
TOWN OFC EL EM
BY:
TOWN MANAGER `'nK
ATTEST:
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OWN OF
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TOWN OF HILLS OUGH
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AT ST: MAY r ��
Town �+
CLERK i
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This contract has been preaudited in the manner required by
Government Budget and Fiscal Control Act.
Ken Chavious, Orange County Finance Officer
/4(4��,V 11(-
L.Bingham Roenigk, Town of Zboro
Finance Officer
Kay Jo on, Town of Chapel Hill Finance Officer
Greg Siler, Town of Hillsborough Finance Officer
08/14/2008
Tax Collections Interlocal Agreement Work G90up
Options for Recouping Cost to Collect Taxes Within Town Jurisdictions
Current Practice County char es Towns 1/2 of 1%of collections Future Years Projections
%of Total
2007 Collections Attributed to FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13
Each Entity
Assumes annual increase in levy of 2.5%;
118,142,453 Assumptions RMV levy will revert to State July 1,2011
(2007 Collections"2.5%annual increase
Of the total levy value,the following values are attributed to the individual jurisdictions: Calculation in levy)" 1/2 of 1%
Town of Cha el Hill 28,093,124 25.2% $143,977 $147,489 $132,437 $154,512
Town of Carrboro 10,190,123 9.2% $52,224 $53,498 $51,121 $56,046
Town of Hillsborough 3,839,842 3.5% $19,679 $20,159 $19,267 $21,119
City of Mebane 1 0.0%
Total Revenue to Orange County, $215,881 $221,146 $202,824 $231,677
ADDENDUM TO THE INTER-LOCAL AGREEMENT
FOR TAX COLLECTIONS
This is an ADDENDUM to the Inter-local Agreement for Tax Collections entered into on July 3,
2006, by Orange County (referred to as "County"), the Town of Carrboro, the Town of Chapel
Hill, and the Town of Hillsborough (individually and collectively referred to as "Town" or
"Towns"). This ADDENDUM sets forth the terms and conditions for the shared costs between
the County and the Towns for the purchase and yearly maintenance costs of a centralized and
systemized tax billing and collection software system for the Joint Tax Collection System. The
parties to this Addendum, pursuant to the authority contained in Article 20, of Chapter 160A of
the North Carolina General Statutes, this the day of October, 2009, do hereby agree as
follows:
WHEREAS, on July 3, 2006, the County and the Towns entered into an Inter-local
Agreement to provide for centralized and systemized collection of property taxes in Orange
County benefiting the units of government contracting both in costs and information services;
and
WHEREAS, pursuant to Article VI of the Inter-Local Agreement, the Towns agreed to
pay a surcharge to be credited toward the purchase and yearly maintenance of a comprehensive
software package to support and maintain the collection of tax revenues due to the Towns; and
WHEREAS, the County has identified and secured funding for the first installment of the
acquisition and installation of comprehensive billing and collections software that will support
and maintain the collection of tax revenues; and
WHEREAS, it is anticipated that the County will seek and acquire additional financing
during fiscal year 2010-11, with repayment to begin in fiscal year 2011-12; and
WHEREAS, the surcharge collected will used for acquisition and installation of the
comprehensive tax billing and collection portion of the software acquisition calculated based
upon an formula agreed upon by the parties (see attachment A), and a yearly support and
maintenance cost which is to be determined by staff from all jurisdictions no later than
November 301h of each year and approved by the Manager of each jurisdiction.
NOW THEREFORE, in consideration of the premises and of the following mutual promises,
covenants, and conditions, The County of Orange, the Towns of Carrboro, Chapel Hill and
Hillsborough agree as follows:
1. The County Responsibility:
a. The County will provide the initial funding for the acquisition of the
comprehensive tax billing and collection software system and all related
requirements; the total cost for the acquisition and installation of the software
shall not exceed $2.5 million. The County will acquire the financing for both
the County and the Towns' portion of the cost of the acquisition and
installation of the tax billing and collection software and related requirements.
b. The County will finance the cost of the tax billing and collection software
system in two installments: the first financing installment shall be for $1.5
million over a 64 month period; and the second financing installment, shall
occur during fiscal year 2010-2011, for the balance needed to complete the
project not to exceed $1 million and financed for a period of 54 to 64 months.
c. The County will bill the Towns for their portion of the cost of the acquisition
and installation of the software in two yearly installments beginning in fiscal
year 2010-2011.
d. The County will bill the Towns beginning in fiscal year 2010, and every year
thereafter. On June 30th the County will bill the Towns for an interest and
principal payment. On November 30th of the same year the County will bill
the Towns for an interest only payment. The County will bill the Towns for
the cost software system until the Towns' portion of the costs is paid in full.
2. The Towns Responsibilities:
a. The Towns will pay the County a surcharge toward the purchase and yearly
maintenance of the comprehensive software package to support and maintain
the collection of tax revenues due to the Towns.
b. Each Town will repay the County their portion of the cost of the acquisition
and installation of the tax billing and collection software based upon a formula
agreed upon by the parties (see attachment A).
c. Each Town will repay the County in two yearly payments: on or by July 31St
of each year the Towns will pay the County a principal and interest payment
and on or by December 31 St of each year, the Town will pay an interest only
payment, beginning July 31, 2010;
d. Each Town will pay a yearly support and maintenance cost which will be
determined by staff from all jurisdictions no later than November 301h of each
year and approved by the Manager of each jurisdiction. This cost will be in
addition to the cost of acquisition and installation of the software.
3. The Parties Responsibilities:
a. Each party within this ADDENDUM agrees that requested customization of
reports or software will be the sole financial responsibility of the requesting
entity.
�o 110/0
4. Each year the Towns and County will convene prior to November 15th to review
prior year expenditures and coming year estimates for expenditures in preparing
cost projections for the yearly maintenance costs for the next fiscal. This
information will then be brought forward to each jurisdiction's review.
This ADDENDUM shall become effective when properly executed by all parties
pursuant to Resolutions adopted by the governing board of each. The parties hereto have
caused this ADDENDUM to be execd in accor ance with resolutions of their
respective governing bodies this the�_day of , 2009.
COUNTY O NGE
BY. ( .c
z
Valerie P. Foush , Chair,
Orange County Board of Commissioners
ATTEST•
� 0 ajAik,
Donni Baker, Clerk to the Board of Commissioners
TOWN OF CARRBORO
BY:
Mark Chilton, Mayor
ATTEST:_
CLERK
TOWN OF E L
't0 W
®� BY:
Town Marter, chapel Hill
ATTEST:
CLERK
13
OF I SBOROUGH
om Stevens, Mayor
ATTEST:
CLE
This addendum has been preaudited in the manner required by the Local Government Budget
And Fiscal Control Act:
Gary H6,nrpfure. ge County Finance Officer
L. Bing Roeni k, o o Carrbo Finance Officer
Kenne C. Pennoyer, own of Chapel Hill Finance Officer
Greg Siler, Town of Hillsborough Finance Officer
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ORANGE COUNTY
NORTH CAROLINA
Interlocal Agreement — County and Towns
Taxation Collection
Board of Commissioners
Business Meeting
June 2, 2026
15
Current Joint ILA for Municipal Tax Collection Charges
• Original Interlocal Agreement made in 1978 in accordance with North Carolina General
Statute 160A-461 to collect taxes for Carrboro, Chapel Hill, and Hillsborough.
• Updated in 2006 — single agreement that included all three towns.
• Municipal tax collection rate set at 0.5% of the annual amount collected for each of the towns
with an expiration of agreement set not to exceed 99 years from July 1 , 2006.
• Agreement requires unanimous approval from all three towns and County to make
amendments and requires a one-year notice for termination.
ORANGE COUNTY
2 NC)RTH CARC7LINA
16
Purpose
The Tax Office and Budget have met with all three towns , and informed them
of the county's interest in replacing the current agreement with separate
agreements with regular 5-year terms.
Staff are seeking guidance from Board whether to terminate agreement prior
to June 30th, to renegotiate for FY 28 .
ORANGE COUNTY
3 NC]RTH C.ARC7LINA
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Tax Office Operating
Expenses
Tax Office Expenditures
$6,000,000.00
• Increased by 62% since 2016
$5,000,000.00
• $ 1 , 882 , 056 increase in annual
needs $4,000,000.00
• Operating Expenses have $3,000,000.00
3,0° °° °°
outpaced Municipal Fee $2,000,000.00
Revenue
$1,000,000.00
• Municipal Fee covers 7% of Dept
Expenses $ °°
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
ORANGE COUNTY
4 NC]RTH C.ARC7LINA
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Survey : Fees Charged for Municipal Tax Collection
• Tax Office staff surveyed counties In Comparison , Orange's Cost
for municipal collection rates and To Municipalities is the lowest combined results with results of a at 0.5% .
Wake County survey. 1.50°% 10
2.00% 4
• Twenty-seven counties 0.75% 3
1.00% 3
3.00% 2
• Range from 0.5% to 3.0%. 0.50% 2
1.75% 1
0.85% 1
• Ten counties charge 1 .5% 1.25% 1
Grand
Median 1.50%
• Average rate 1 .45% Average 1.45%
ORANGE COUNTY
5 NC)RTH CARC7LINA
19
Wake County Fee Increase
• Wake County presented to Tax Assessment Workgroup on December 2nd
• In 2021 went through similar review of its costs to municipalities, which was
significantly below peers.
• Implemented four-year phase in from FY 2022 through FY 2025 from 0 .2% to
0 .75% .
• Goal was to have Municipal Fees cover 50% of Operating and Revaluation
expenses.
• Funded enhancements to the office in that four-year window.
• Since 2024 revaluation , Wake BOCC committed to a transition from 4-year
cycle to 2-year cycle by 2029.
ORANGE Q.OUNTY
6 NC)RTH CARC7LINA
20
Questions?
ORANGE COUNTY
NC]RTH C.A 3LINA