HomeMy WebLinkAboutAgenda - 10-15-2002 - 5d 1
ORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: October 15, 2002
Action Agenda
Item No.
SUBJECT: Resolution Levying the Third One-Half Cent Local Government Sales and Use
Tax
DEPARTMENT: Budget PUBLIC HEARING: (Y/N) No
ATTACHMENT (S): INFORMATION CONTACT:
Attachment 1. NC Association of County Donna Dean 245-2151
Commissioners Fact Sheet on Sales Tax
Conference Committee Report TELEPHONE NUMBERS:
Attachment 2. Listing of Projected Hillsborough 732-8181
Revenues for Orange County and Three Chapel Hill 968-4501
Municipalities (provided by the NC Durham 688-7331
Association of County Commissioners) Mebane 336-227-2031
Attachment 3. Draft Resolution Levying
the Third One-Half Cent Local
Government Sales and Use Tax and
Prescribing the Method of Distribution of
the Proceeds Within Orange County
PURPOSE: To consider approval of a "Resolution Levying the Third One-Half Cent Local
Government Sales and Use Tax and Prescribing the Method of Distribution of the Proceeds
Within Orange County."
BACKGROUND: Since 1979, the General Assembly has repealed or changed sales and
property tax laws that have, for the most part, negatively affected local government revenues.
Over the years; in an effort to make up for some of these local revenue losses, the State chose
to reimburse counties and cities for a portion of the losses.
On February 5, 2002, Governor Easley declared a state of fiscal emergency to deal with the
State's projected budget shortfall for fiscal year 2001-02. At that time, Governor Easley
announced his intent to withhold reimbursements from local governments in an effort to balance
the State's budget. This action by the Governor led to a revenue loss of more than $700,000
for Orange County in fiscal year 2001-02.
The County's 2002-03 Manager's Recommended Budget anticipated the receipt of the
reimbursements. In May 2002, the Governor released a proposed budget for fiscal year 2002-
03 that did not allow for reimbursements to local governments. As a result, the Manager
recommended, and the BOCC acted on, 2002-03 budget reductions during the June 2002
budget work sessions to accommodate the loss of more than $3.1 million in revenue that should
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have come to the County from the State in the current 2002-03 fiscal year. BOCC actions
included postponing capital project expenditures and freezing vacant positions.
In an effort to replace the reimbursements that counties and cities have relied on for many
years, the North Carolina General Assembly authorized legislation in September 2002 that
allows local governments to implement Article 44 one-half cent sales and use tax. The new tax,
which would not apply to food, is authorized to begin no sooner than December 1, 2002.
Enactment of this tax will make North Carolina's overall sales tax rate 7 percent until July 1,
2003. At that time, a one half cent sales tax, dedicated to the State's budget, will sunset and
the overall rate for North Carolina will drop to 6.5 percent.
Attachments 1 and 2 of this abstract offer information provided by the North Carolina
Association of County Commissioners (NCACC) regarding the additional one half cent sales
tax. While there is no requirement for the Commissioners to conduct a public hearing in order
to enact the new one-half cent sales tax, the Board must adopt a resolution to enact the tax.
Attachment 3 provides a draft resolution for the Board to consider adopting. Upon adoption of
the resolution, the County is required to give the Secretary of Revenue thirty-day notice of the
tax levy. In order for the new tax to take effect by December 1, 2002, the Secretary of Revenue
must receive notice of the tax levy no later than November 1, 2002.
FINANCIAL IMPACT: Based on estimates supplied by the NC Association of County
Commissioners, collection estimates for Orange County total $1.8 million from December 1,
2002 through June 30, 2003. The new legislation provides a "hold harmless" clause, effective
July 1, 2003, to ensure that local governments do not receive less funding from the new sales
tax than they normally would have received from the series of reimbursements being terminated
by the State. Orange County does not expect to need "hold harmless" funding, as preliminary
forecasts anticipate that receipts from Article 44 sales tax for the upcoming 2003-04 fiscal year
will approach $3.8 million, compared to the approximately $3.2 million that Orange County
might otherwise have received from reimbursements: Because of the tendency of sales tax
revenues to increase somewhat from year to year, it is anticipated that Orange County will
benefit in subsequent years from the exchange of reimbursements for Article 44 sales tax
proceeds to an even greater extent than in the upcoming fiscal year.
RECOMMENDATION (S): The Manager recommends that the Board of County
Commissioners approve the attached resolution.
Sales Tax Frequently Asked Questions http://www.ncacc.org/salestaxfags.html
Fact sheet on Sales Tax Conference Committee Report
1. Tax Rate—Enactment of this tax will make the overall state sales tax
rate 7 percent. The half-cent state sales tax enacted last year is
scheduled to sunset or end July 1, 2003.At that time the overall rate
will drop to 6.5 percent. Nothing in this bill affects that sunset.
2. Hold Harmless—There is No hold harmless provision in the bill for
current year.The hold harmless provisions scheduled to take effect
July 1, 2003, are not affected by this bill.
3. Effective Date—No sooner than Dec. 1,2002.
4. Distribution—Proceeds will be distributed half per capita and half
point of sale. Proceeds will be distributed quarterly until July 1, 2003,
thereafter monthly.
5. Local resolution—Each county board of commissioners will be
required to take action on a resolution to levy the tax. Previous action
to levy the tax authorized for next year is not sufficient.
6. Notice and hearing—a county will be able to pass a resolution to levy
the tax by giving at least 48 hours notice of its intent to adopt the
resolution. No formal public hearing is required.
7. Notice to Secretary of Revenue—A county will be required to give
the Secretary of Revenue 30 days notice of the tax levy.Thus, action
must be taken and the Secretary notified by Nov. 1 if the tax is to take
effect by Dec. 1.
1 of 1 10/10/2002 11:20 AM
North Carolina Association of County Commissioners
Proiected
Receipts from Half Cent Local O tion Sales Tax, Effective Dec. 1
Proiected Sales Tax
FY01-02 2001-02 % of Revenue December 1• Gain/ Loss from
-Local Governments Reimbursements Total Sales Tax 7 Mos. Recei is Reimbursements
Moore 2,830,625 0.680% 1,437,922 1,392,703
Aberdeen 173,962 0.032% 67,706 106,256
Cameron 4,648 0.003% 6,266 1,617
Carthage 50,512 0.019% 39,919 10,593
FoAre Village 11,107 0.004% 9,037 2,070
Pinebluff 28,557 0.010% 21,166 7,391
Pinehurst 347,716 0.087% 183,801 163,916
Robbins 56,365 0.011% 23,020 (33,345)
Southern Pines 536,787 0.099% 209,584 327,203
Ta lortown 13,141 0.008% 16,006 2,864
Vass 22,826 0.007% 14,522 8,304
Whispering Pines 63,540 0.019% 39,208 24,332
Nash 2,600 851 0.6880/, 1,454,997 1,145,854
Bailey 10,355 0.005% 10,733 378
Castalia 1,622 0.003% 5,324 3,702
Dortches 739 0.007% 13,831 13,092
Middlesex 14,641 0.007% 14,428 214
ome er 828 0.002% 4,768 3L940
Nashville 79,564 0.033% 70,568 8,996
Red Oak 2,138 0.021% 44,760 42,623
Rocky Mount 1,277,554 0.419% 885,831 391,722
Shar sbur 16,262 0.012% 25,332 9,070
Spring Hoe 27,106 0.010% 21,123 5,983
Whitakers 10,908 0.006% 12,183 1,275
New Hanover 4,641,632 1.876% 3,968,593 672,939
Carolina Beach 87,179 0.046% 97,297 10,119
-Kure Beach 28,387 0.015% 32,223 3,836
Wilmington 1,976,183 0.607% 1,284,341 691,842
-Wrightsville Beach 64,823 0.035% 75,059 10,236
Northampton 469,989 0.128% 271,273 198,716
Conway 15,768 0.004% 9,292 6,476
-Garysburg 9,336 0.007% 15,047 5,711
-Gaston 10,228 0.006% 12,495 2,266
Jackson 5,9321 0.004% 8,226 2,294
Lasker 791 0.001% 1,442 650
Rich Square 10,381 0.006% 12,080 1,699
Seaboard 12,308 0.004% 9,026 3,282
evem 21,309 0.002% 3,243 18,066
Woodland 8,063 0.005% 10,080 2,017
Onslow 1,626,885 1.096% 2,318,025 691,140
-Holly Ride 20,569 0.006% 12,829 7,740
Jacksonville 514,379 0.496% 1,050,430 536,051
North Topsail Beach 38,816 0.007% 14,255 24,561
Richlands 13,091 0.007% 15,753 2,662
wansboro 22,042 0.011% 22,595 553
-�j -d-range 3,171,582 0.860% 1,818,964 1,352,617
Carrboro 250,548 0.1.23% 260,935 10,388
ha el Hill 730,557 0.369% 781,425 50,867
Hillsborough 115,524 0.040% 85,063 30,462
Pamlico 253,404 0.105% 222,024 31,380
Alliance 0 0.000% _ _
Arapahoe 927 0.000% 152 774)
Ba boro 4,344 0.001% 2,352 1,992)
rantsboro 1,287 0.000% 468 819
Mesic 1,246 0.000% 570 676
conference sales tax Page 8
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ORANGE COUNTY BOARD OF COMMISSIONERS
A RESOLUTION LEVYING THE THIRD ONE-HALF CENT (1/2¢)
LOCAL GOVERNMENT SALES AND USE TAX AND PRESCRIBING
THE METHOD OF DISTRIBUTION OF THE PROCEEDS
WITHIN ORANGE COUNTY
WHEREAS, the General Assembly has authorized the Orange County Board of Commissioners to
levy a one-half percent (1/2%) local sales and use tax by enacting N.C.G.S. 105-517(b) in Section
34.14(a) of Session Law 2001-424, as amended, by S.L. 2002-123, "An Act to Accelerate the
Additional One-half Cent (1/2¢) Local Option Sales and Use Tax and to Make Conforming and
Technical Changes," and
WHEREAS, the Orange County Board of Commissioners gave proper public notice of the Board's
intent to consider this resolution, as required by Section 10 of S.L. 2002-123, and
WHEREAS, Orange County has lost approximately $3,171,582 in funds made available by the State
of North Carolina to replace revenue lost because of legislative action: (1) to repeal sales taxes
imposed on purchases made with Food Stamps; (2) to repeal property taxes imposed on inventories
held by manufacturers, retailers and wholesalers; (3) to repeal taxes on intangible personal property;
and (4) to reduce taxes levied on residential property owned by low-income elderly taxpayers; and
WHEREAS, the Orange County Board of Commissioners hereby finds that, particularly in light of the
circumstances cited herein, the levy of"The Third One-Half Cent (1/2¢) Local Government Sales and
Use Tax" is necessary to adequately finance the operations of the county and the cities and towns
herein.
NOW, THEREFORE, BE IT RESOLVED by the Orange County Board of Commissioners that:
(1) There is hereby imposed and levied within Orange County the third one-half cent (1/2¢) Local
Government Sales and Use Tax authorized by Section 34.14(a) of S.L. 2001-424, as amended by
S.L. 2002-123, and codified as Article 44 of Chapter 105 of the General Statutes of North
Carolina. The tax hereby imposed and levied shall apply to the same extent and be subject to the
same limitations as are set forth in said S.L. 2001-424.
(2) Collection of the tax by the North Carolina Secretary of Revenue, and liability therefore, shall
begin and continue on and after the first day of December 2002.
(3) The net proceeds of the tax levied herein shall be distributed by the Secretary of Revenue to
Orange County as prescribed by N.C.G.S. 105-520. The amount distributed to Orange County
shall be divided among the county and the municipalities herein in accordance with the method by
which the one percent (1%) sales and use tax levied in Orange County, pursuant to Article 39 of
General Statutes Chapter 105, are distributed.
(4) This Resolution is effective upon its adoption, and a certified copy hereof shall be forwarded to the
North Carolina Secretary of Revenue.
Adopted this 15th day of October 2002.
Barry Jacobs, Chair
Orange County Board of Commissioners