Click here to view and here to listen to Michael Sanera discussing this Regional Brief.
RALEIGH – Tyrrell County commissioners could avoid a proposed land-transfer tax increase for at least four years by diverting $2.3 million in existing revenue streams to high-priority county government functions. That’s a key finding in a new John Locke Foundation Regional Brief.
“The savings and revenue reallocation recommended in this Regional Brief would generate four times the amount of money the land-transfer tax increase would provide to Tyrrell County,” said Dr. Michael Sanera, JLF Research Director and Local Government Analyst. “That means the county could adopt the ideas in this report and delay a land-transfer tax increase for at least four years.”
County commissioners are asking voters to triple the land-transfer tax, also known as the real-estate transfer tax, May 6. “This tax increase would affect every home sale in Tyrrell County,” he said. “The tax for a $200,000 home would climb from $400 to $1,200. Our report shows that Tyrrell County government could address its needs by setting better priorities with its existing resources.”
Tyrrell is one of more than 20 counties asking taxpayers this May for the right to raise local sales or real-estate transfer taxes. Sanera leads a JLF research team analyzing the potential impact in each county. Working with Sanera are Joseph Coletti, JLF Fiscal Policy Analyst, and Terry Stoops, JLF Education Policy Analyst.
Tyrrell County commissioners cannot argue that local schools are underfunded, Sanera said. “Over the last five years, the school population has decreased by 13 percent, while inflation-adjusted local school spending has jumped by 31 percent,” he said. “That’s not to mention the inflation-adjusted 15 percent increase in state spending and the whopping 33 percent increase in federal spending.”
“If the school district has facility needs, county commissioners and the school board need to explain to taxpayers how they have used the 21 percent increase in local school funding and how they would spend the $379,000 the state has promised for capital improvements over the next 10 years,” Sanera added. “Commissioners should also follow this report’s recommendations for reducing education costs without hurting classroom instruction.”
Tyrrell County revenues have grown 22 percent faster than the combined rate of inflation and population growth since the 2001 budget year, Sanera said. “Tyrrell raised $814,000 more from its taxpayers in the 2006 budget year than in 2001,” he said. “The average family of four paid $776 more in taxes in 2006 than in 2001. A family’s income would have been forced to jump by 38 percent to meet the increase in county government revenues during the past five years.”
Tyrrell County government doesn’t need to take additional money away from taxpayers, Sanera said. “If Tyrrell County adjusted its revenue stream to grow only as fast as the combined rate of population and inflation growth, total revenues would increase 28.5 percent during the next 10 years,” he said. “This increase is more than adequate to pay for county needs.”
County commissioners have easy access to one piece of Tyrrell County’s $2.3 million in funds available for high-priority government functions, Sanera said. “Tyrrell County government already has cash reserves equal to 23.6 percent of the county’s annual budget,” he said. “The state requires an 8 percent reserve for emergencies, but that leaves about $883,000 that’s still available to spend on pressing needs.”
In 2007, the General Assembly gave every county a chance to raise either the local sales tax or the real-estate transfer tax. The new tax options were part of a deal involving the state relieving counties of local Medicaid expenses. The deal also called on counties to forfeit a half cent of the local sales tax rate.
“Even though Tyrrell and other counties were forced to give up some revenue as part of the Medicaid deal, they now benefit from another part of the deal called the ‘hold harmless’ provision,” Sanera said. “It guarantees that Tyrrell County will have at least $500,000 in additional funds that can be used to meet other county needs. Tyrrell actually fares a little better than many counties, with an average of nearly $531,000 expected over 10 years.”
Counties cannot raise the sales or real-estate transfer taxes without a local referendum. Twenty-eight counties have pursued that option since November 2007. Five counties placed both options on the ballot in November. Voters rejected each real-estate transfer tax hike. They also rejected most sales tax proposals. In all, voters have rejected 27 of 33 proposed local tax increases.
“The opportunity for Tyrrell County citizens to vote May 6 provides a check on the county commission,” Sanera said. “Citizens, when given the chance, are rejecting tax increases and sending a message to county commissions: live within the means of county taxpayers.”
The John Locke Foundation Regional Brief “Does Tyrrell Need a Land-Transfer Tax Increase?” is available at the JLF Web site. For more information, please contact Sanera at (919) 828-3876 or msanera@johnlocke.org. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or mkokai@johnlocke.org.