League says tax reform may help cities

N.C. League of Municipalities analysts say the state tax legislation that awaits Gov. Pat McCrory’s signature will generate a $5.8 million windfall for the western Triangle’s major city and town governments by decade’s end.

The league developed its estimates after House and Senate leaders rolled out the compromise bill Monday. It passed the two chambers Wednesday.

The measure’s headline feature is a cut of state income and corporate taxes, but it also affects revenues the state shares with local governments. An earlier version drafted by the Senate appeared likely to take money from most cities and counties, with Durham being a prominent exception because of the Senate plan’s treatment of nonprofits.

League analysts say the final, compromise measure includes changes to sales taxes, utility franchise taxes and other levies that traditionally help fill local coffers.

They figure the city of Durham will see a $282,178 windfall immediately, in fiscal 2013-14, and from there reap anywhere from $714,937 to $867,873 a year.

All told, they estimate the city will receive $4.2 million in extra revenue through fiscal 2018-19.

But city officials are taking that with a grain of salt.

“I don’t plan on developing a spending plan” any time soon for the windfall, as there are “a lot of pieces and parts that have to come together” for the league’s estimates to prove out, City Manager Tom Bonfield said.

He added that city officials need to study the assumptions the league made on the way to compiling its estimates.

As for neighboring Chapel Hill and Carrboro, the league estimates the bill will translate into $1.1 million and $391,888 in extra revenues from now to fiscal 2018-19.

Durham officials craft a new budget every year, but they also maintain for planning purposes a five-year projection of spending and revenues. The projection this year and in years past has assumed state revenue sharing would continue without change to its underlying legal framework.

The year-by-year additions the league is projecting aren’t large enough to make a big difference in the city’s tax rate.

Annually, they would account for much less than the revenue a single penny on the rate would bring in, generally in the range of a quarter to a third of a penny on the rate.

A cent on the city tax rate now brings in about $2.4 million.

The city this year held the line on property taxes, keeping its levy at 56.75 cents per $100 of assessed value.

The city’s property tax rate, averaged, has risen about 1 percent a year since the nationwide economic downturn hit in fiscal 2008-09. Consumer prices in that time have generally risen 1.3 percent a year.

Anti-tax Republicans generally argue that government spending should rise no faster than an index that adds the inflation rate for consumer prices to an area’s population growth.

State estimates suggest Durham County’s population – which is predominantly in the city – has been growing by about 2 percent a year since fiscal 2008-09.

Durham’s combined city/county property tax burden has risen by about 1.5 percent a year since the downturn began, well below the 3.3 percent sum of inflation and population growth rates.