No to sales tax hike

Taxes never go down. Think about that before you mark your ballot on the proposed sales tax increase.

Why in the world would anyone give the Orange County commissioners more money? The board has demonstrated that it cannot manage the county’s tax dollars. The proposed quarter-cent tax increase is good example.

The increase that county voters will either approve or reject at the polls today would put the county sales tax at 8 cents per dollar. The county website says the quarter-cent sales tax hike will stave off an increase in property taxes.
And while the county has gone to great lengths to stress that the revenue raised from the tax hike will go to schools and business initiatives, the county website says 15 percent of the money will go to “improve library and emergency medical services.”

The improved library would be a new building in Carrboro that I assume would be paid for in part by the money the county told Chapel Hill Town Council members it did not have when they asked for the county to pay its fair share of Chapel Hill library operating expenses. For more than a decade, town residents have paid higher taxes to provide library services to county residents who pay nothing to use the facility.

The county raised property taxes just last year by revaluing homes at way more than market value. The commissioners did their best to label that revaluation as a revenue-neutral move, which raised my taxes by more than $300. Not so neutral on my end.

And now the commissioners want to tack on another quarter-cent to the sales tax rate. Neighboring counties charge as much as half a cent less in sales tax, and the increase is likely to inspire some folks to do their shopping in neighboring counties. I’m considering driving to Durham or Alamance County to do my shopping so I can save $30 to $40 a year. The county may lose revenue by raising the sales tax if shoppers take their business out of the county.

Voting down the tax increase is a way to let the commissioners know there is a limit to just how much money they can expect from taxpayers. I know it has been said before, but the commissioners need to learn how to live on a budget. Rejecting the tax hike could be a step toward that end. Tough love. You know?

–Don Evans and Nancy Oates

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18 Comments

  1. Steve Brown

     /  November 2, 2010

    The county will dupe the “highly educated” people of Orange County into voting for this.

    I voted against it. Shame on Orange County for not being able to control its finances.

    This tax will not get a dollar of funding from me, I do all my shopping in Durham even though I live in Orange county. The shopping is just way superior there.

  2. Terri Buckner

     /  November 2, 2010

    I will vote for this tax. This isn’t a tax for the BOCC–it’s a tax for the citizens of Orange County. At this time, the bulk of our tax dollars goes to providing basic services, primarily education. The unfettered growth in Chapel Hill and Carrboro consume the majority of the county budget. As long as the Town Council and Board of Alderman continue to approve large developments, revenues from economic development will never catch up with the need for schools, roads, and public services required by those new residents. And then there are the social services needed by our lower income residents who continue to need more support services while the budget for those services continue to be cut.

    Blaming the BOCC for mismanaging the budget is naive. Public budgets serve a wide variety people, all of whom have different priorities. Every year at budget time there are complaints when cuts are made. And this past year, those cuts hurt. They hurt people who don’t deserve to be hurt; people who need the services that were cut. Without additional funding and with continued growth, next year will be even worse.

    I won’t disagree that we need to have a more public dialogue about how we spend our tax dollars. And I think we need tighter stipulations on how this particular tax can be spent. But the consequences of not passing this tax are too significant to stand on that principle. Let’s pass the tax first and then work with our elected officials to ensure that the revenues are used for improving our aging schools and economic development.

  3. Steve Brown

     /  November 2, 2010

    So, you think we need tighter stipulations on where this new tax will be spent, but you are voting for it anyway? Wow. You are closing the barn door too late.

  4. Terri Buckner

     /  November 2, 2010

    Yes John….oh, I mean Steve…I am voting for it anyway. The next opportunity is a couple of years away. I don’t think we can wait.

  5. Steve Brown

     /  November 2, 2010

    John?

  6. Fred Black

     /  November 2, 2010

    Don and Nancy, if “The board has demonstrated that it cannot manage the county’s tax dollars,” there ought to be a lot of angry people out there anxious for new leadership.

    Now look at the ballot for the Board of County Commissioners.

  7. Brandon Rector

     /  November 2, 2010

    I’m not sure I buy the “drive to another county to save money” argument. A five-mile trip (10-mile round trip) costs 45 cents in gas in a Prius. Your purchase on that trip has to be $180 or more to save any money. If you drive anything other than a Prius or drive further than five miles, you’ll have to be making a larger purchase to save any money. Good luck saving $30 a year by driving to Durham and Alamance.

  8. I hate having to say this over and over again, but the “setting property values at more than market value” argument has NOTHING to do with raising taxes. The total revenue to the county because of the revaluation was identical to before the revaluation — that is revenue neutral. Whether the basis in market value was $1000 or $1B, the value * the rate is the total revenue — thus the commissioners set the rate to be the same result regardless of the value. Your taxes (as opposed to the entire county’s) may go up or down as your value changes compared to the rest of the county, but that has nothing to do with “revenue neutral”.

    Look at your tax bill this year compared to last (ie, without a revaluation but commissioners kept the same rate again) — did they raise taxes this year?

    btw, I looked at a house in my neighborhood yesterday that has a $286k tax value and they are asking $397k for it.

  9. Steve Brown

     /  November 2, 2010

    Mr. Rector- I like many work in Durham/RTP so it is right on the way home to stop at South Point, New Hope Commons, Sams Club, etc.

    And on top of the tax savings, I consider it a boycott of Orange County since I do not believe in their tax and spend ways.

    Mr. Barrett- yes, total tax revenue did not go up last year, that is why instead of cutting the County wants us to vote for their little sales tax. And what is the point of your comment re: house tax value vs asking price?? That one confused me.

  10. Ray Gronberg

     /  November 2, 2010

    Don, your claim that Orange County revalued homes last year at way more than market value is simply false. See the story I wrote for the Aug. 29 Herald-Sun. In relevant part:

    “State figures suggest that on average, property in Durham and Orange counties is still selling for about or slightly more than its assessed tax value.

    But in 31 other counties — among them two Triangle counties, Wake and Chatham — assessed tax values for many properties are now running a little to a lot ahead of what people can actually sell them for. …

    “The [NC] department [of revenue] each year puts out a “sales assessment ratio” study, comparing a sample of sales numbers against published tax assessments, which officials are supposed to use in calculating payments due from some utility companies. …

    In theory, the assessed value and market value of property is supposed to match up, $1 for $1.

    In practice, the ratio fluctuates. In most counties, it usually drops further below 1 to 1 the longer tax assessors have gone between state-mandated property revaluations. In some, it clocks in above a 1-to-1 match thanks to assessment or market problems. …

    Orange County’s current ratio is 0.9865, again very close to the $1 for $1 ideal.

    It’s a year removed from a somewhat controversial property revaluation that saw critics argue that Orange’s assessors had overvalued land and homes compared to actual market conditions.

    But according to the state, the Orange tax office has never in its six most recent revaluations hit the $1 to $1 standard for valuing property.

    Each time, it assessed properties on average for less than they were worth on the market. The current ratio is actually closer to the ideal than it was immediately following all but two of Orange’s six most recent revaluations.

  11. Steve Brown

     /  November 2, 2010

    Miracle of Miracles, it did not pass. I bet $50 that the Commissioners do not get the obvious message- “stop spending” and raise property taxes instead. They’ll just say voting this tax down forced them to do it. And the sheeple of Orange county will stare blankly and believe it.

    Glad to see the massive landslide of Republican wins across the country, too! Time for some real change.

  12. adam zinn

     /  November 3, 2010

    Ray and Don – I met w/ the board of appeals on +- 40 properties that I felt were overvalued. Some were new homes for sale that I had listed for 5 to 8% below their new value. Some were lots that I had sold for up to 10% below their new value. They budged on some, but remained firm on most saying that their premise was that they are looking at the value as of Jan 2009 and that they have to look at a 4 year window (the next revaluation).

  13. Don Evans

     /  November 3, 2010

    Ray

    The tax value of my house increased 30 percent with that last revaluation. The county tacked on more than $100,000 to its value. The same happened to several of our neighbors. We know because we checked with them. Our repeated appeals to the county have gotten us a 1.7 percent reduction in the house’s tax value.

    Could we sell our house for anywhere near the value the county has put on it? Doubtful, as several houses in our neighborhood have shown — asking prices near the tax value just won’t bring in buyers these days. The state and county averages are just that — averages. One big sale near the tax value can distort the numbers for quite a few other houses that cannot be sold at or even come close to the state or county numbers.

    And you can list a house for sale at any price; the problem can be whether a buyer will match that price.

    The county and the state have a stake in urging all of us to believe that the revaluations are fair and equitable. You are a journalist, so I would expect you to dig a little deeper to question what some state agency or official hands you for a story versus what the reality is.

  14. Ray Gronberg

     /  November 3, 2010

    Well, Don, as a journalist I covered affairs in Orange County from 1992 to 2005. In that time, I made it a habit any time I was writing about real-estate deals to check both the tax and sales values of the tracts/homes involved. What I saw, without any exception that now comes to mind, was that tax values lagged sales values even in years when we were fresh off a revaluation.

    It appeared to me that the tax office was systematically undervaluing properties to give people what amounted to a discount on their property taxes. No one would quite own up to that (understandably, because state law requires a valuation to the market) and at the time I didn’t have or know of any firm data that would go beyond anecdote and individual cases to give a truly representative picture of what’s going on.

    UNC School of Government prof Chris McLaughlin helped bring such data to my attention when he blogged about the sales-assessment ratio back in August (see his post at http://sogweb.sog.unc.edu/blogs/localgovt/?p=2978). The actual data (see http://sogweb.sog.unc.edu/blogs/localgovt/wp-content/uploads/2010/08/Sales-Ratio-For-8-Years.pdf) were quite clear in showing that my impression from the individual cases I’d looked at had been correct, that the Orange tax office had in fact undervalued property relative to the market going back at least to 1987. And it continued to do so even in the 2009 revaluation. The data was also quite clear in showing that many other county tax offices around the state were in fact able to set tax values equal to market values $1 for $1, even as Orange was .

    These numbers are obviously averages. YMMV, individually. But they’re the best data available and far better than any anecdotal account. The implications are, for the argument you’re having, that what folks are seeing now is basically the elimination of the previous discount. That’s different from what you claim the problem to be.

  15. Ray, thank you for responding with actual cites to the underlying data. Refreshing and instructive putting the power to check in the hands of your readers.

    I looked at the ‘blog post and walked away with a different conclusion – the valuations were out-of-line in Orange County and the problem looks to grow worse. That seems to be what Christopher McLaughlin (the author of the ‘blog post) also believes:

    “As a result more and more counties are seeing their ASRs grow over time instead of shrink, as they always have before. Four counties now have ASRs over 1.10, meaning that the real property sold in those counties last year on average was assessed 10% or more above its true market value. Not surprisingly, all four counties are from the mountains or the coast, where prices have been most volatile. Cherokee County takes the dubious honor at the top with an ASR of 1.15. Another six counties have ASRs above 1.05.

    All thirty-one counties with high ASRs are likely to suffer decreases in their tax bases if they revalue their property anytime soon. But even counties with “normal” ASRs could suffer that same fate in these uncertain economic times.”

    I looked at the NC Revenue services reports he drew his 2009 numbers from ( http://www.dornc.com/publications/property.html – Sales Ratio )

    and found that they were done pursuant to NCGS 105-284 and are used to equalize PUBLIC SERVICE COMPANY PROPERTY valuations:

    “This report is a compilation of the sales assessment ratio studies, which were
    conducted pursuant to the provisions of N.C.G.S. 105-284. The sales assessment ratios
    contained in this report are used to equalize the public service company property
    valuations. The studies were conducted in accordance with the Sales Ratio Study seminars
    instructed by the staff of the Property Tax Division. The ratios have sale transactions,
    which occurred during the period from 01/01/08 to 12/31/08.”

    Did you interview Chris? From what it looks like he is using the study of public service company valuations as a rough yardstick for measuring residential property sales ratios. Is that correct?

    In looking at the valuation reports ( http://www.dornc.com/publications/valuations.html ), it appears that in 2009-2010, the total taxable property for Orange was 15,481,216,206 as contrasted with 2008-2009′s 12,842,578,016 – a fairly steep rise which, at least as far as I know, can’t be accounted for by new development or a massive influx of personal property. The increase in public service properties was 9M, from 226M to 235M, a fraction of the overall increase. Since that increase didn’t correlate with the overall increase, and if I’m correct about Chris’ use of data, I’m not sure you can broadly declare the rate was fair.

    If I’m off-base please correct me.

    Either case, interesting context.

  16. Ray Gronberg

     /  November 4, 2010

    Will, I did interview Chris. If you look at GS105-284, what the state has set up is a way to price hard-to-value property like utility easements (which change hands mostly in a one-way manner and most often just once). The state does the sales-assessment study, sampling all real estate transactions in a county, and instructs local tax offices to use the ratio as a proxy in calculating the value of utility property. The ratio as a collateral benefit can be used to judge the accuracy of a county’s reval and how strongly or not its real-estate market is growing.

  17. Steve Brown

     /  November 4, 2010

    I don’t see where the valuation of the home matters that much- it is the tax rate times the value that equals the tax bill. So I don’t see where it was some big favor that Orange County left their valuations low, all they did was raise the rate when they needed money. They have one of the highest tax revenues per capita in the state.

    And, based on the three appeals that I have applied for , and the appalling lack of professionalism shown by the staff at the county and state level, I would say some of the undervaluation is related to the employment of “incompetent boobs”.

  18. Thank you Ray for the clarification. It makes sense that they use the aggregate as a proxy but that number is obviously sensitive to a variety of issues – including the valuation of commercial vs. residential realty. Last round of valuations I spot checked percentage increase in valuations of commercial vs. residential properties is several areas of Chapel Hill. From what I found, residential valuation increase as a percentage far outpaced the commercial valuations. I attributed some of that difference to the liquidity of the residential market vs. the commercial market in Chapel Hill. Still, after factoring out that difference the rates climbed more steeply for residential.

    Another observation I made at the time was that in evaluating comparable residential properties in Hillsborough and Chapel Hill, the rate of increase in valuations was between %15 and %20 above Hillsborough in Chapel Hill. That difference could partially be attributed to the value of our school system and partially to Chapel Hill’s other amenities but does that value really represent a %15 premium? This bias means that Chapel Hill residents can expect greater bumps in County taxes. Add in the special district tax and Town taxes and that aggregate County ratio seems little comfort.

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