Foundation: Polk doesn’t need land transfer tax increase
Published 2:40 pm Monday, July 28, 2008
Polk County commissioners are asking voters to approve a 200 percent increase in the real estate transfer tax (from 0.2 to 0.6 percent) on November 6. The real estate transfer tax will apply to the sale price of all real property, including new and existing homes. When a home is sold for $200,000, the homeowner would pay a transfer tax of $1,200. If approved, the transfer tax is expected to increase county revenues the first full year by $952,656 (FY 2008-09).
In its 2007 session, the North Carolina General Assembly relieved all counties of paying the portion of Medicaid expenses that had been forced on counties, in exchange for the half-cent sales tax that the counties levied to help pay those expenses. In addition, the legislature voted to give counties the option to ask voters to approve new tax increases. Options include increasing the sales tax, imposing land transfer taxes or no tax hikes at all.
This Regional Brief documents Polk County&squo;s current spending and tax policies. County spending has not been properly managed or prioritized. Currently, about $11.1 million is available to be spent on high-priority government functions, such as school construction (about $72 million over 10 years).
In addition, growth has more than paid for itself. County revenues have grown 6.6 percent faster than population and inflation over the&bsp; last six years. Thus new residents have paid more than their fair share of county expenses. Studies that purport to show that growth does not pay for itself are fatally flawed because they only calculate the costs of new residents and ignore the revenue stream generated by those residents.
Finally, if Polk County tax revenues increase only as fast as population and inflation over the next 10 years, total revenues will increase 37.7 percent. This increase is more than adequate to pay for county needs, including new school construction. This is especially true if the county is willing to consider new and innovative ways to accommodate enrollment growth.
There is plenty of money available to meet Polk County&squo;s needs.
The last thing the county needs is a tax increase. Instead, county voters must demand that county officials institute better financial management and establish better spending priorities.
Medicaid swap. The state is taking over the county portion of Medicaid over three years, but is also taking a portion of revenues from counties, too. The legislature included a &dquo;hold harmless&dquo; provision to guarantee that each county ends up with at least $500,000 more available in its budget.
In other words, Polk County will have at least $500,000 in additional funds to spend each fiscal year, including the current fiscal year, which started in July.
Available cash reserves. Polk County currently has cash reserves that total about $6.2 million. This amount is 26.1 percent of its annual budget. The state treasurer&squo;s policy manual states that county undesignated- fund balances should not drop below 8 percent of total expenditures. Polk County has exceeded that amount. The county has collected about $4.3 million in taxes above the 8 percent strongly recommended by the treasurer ‐ cash that is currently available to help with existing needs or to provide much-needed tax cuts or both.
Per-capita revenue increases. From 2001 to 2006, Polk County&squo;s per-capita revenues have increased by 6.6 percent after adjusting for inflation. This means that new county residents are contributing more than their fair share of county revenues.
In other words, population growth has been &dquo;paying for itself &dquo; because real county revenues are growing at a faster rate than population.
In addition, if the county had lived within its means ‐ that is, if its budget increases had been kept in line with population and inflation increases, rather than exceeded them ‐ over the last six years, the county&squo;s 2006 revenues could be about $5 million less. That amount could and should be returned to the taxpayers in the form of tax cuts.
Public school concerns. According to projections by the N.C. Department of Public Instruction, Polk County will experience over the next 10 years a decline in total enrollment by 279 public school students, which would represent a 11.7 percent decrease (about 1.2 percent decrease per year). Despite this projected loss of students, the county will receive an estimated $10.9 million in capital funding from state, local, and lottery sources during the next 9 years (about $1.2 million per year average).
When school officials determine that health and safety hazards within an existing school necessitate the construction or renovation of a school, the county should first consider the following options:
1. Charter schools
2. Ninth-grade centers
3. Public/private partnerships
4. Adaptive reuse
5. Satellite campuses
6. Virtual schools
Unfortunately, taxpayers often react by giving school districts a blank check without sufficiently scrutinizing the district&squo;s long-term capital plan or holding them accountable for their spending. When taxpayers give school districts license to raise taxes for unchecked spending year after year, school leaders feel a sense of entitlement for more of the taxpayer&squo;s money. Lacking accountability, counties turn to more frequent tax increases, even though the additional money has not improved student performance.
Polk County faces a crisis, but it is not a funding crisis. The county has about $11.1 million over and above its base budget to meet its needs. A land transfer tax increase at this time would only encourage more wasteful and inefficient spending. County voters need to demand that the&bsp; county live within the means of the taxpayer. Continuing on the current path will not meet the real needs of county residents.