Local Government Bonds And Sales Tax Results | Eastern North Carolina Now

    Publisher's note: The author of this post is Sarah Curry, who is Director of Fiscal Policy Studies for the John Locke Foundation.

    Tuesday was a big day for many political races across North Carolina, but some of the races that were overlooked by major media outlets will affect citizens the most. There were thirty bonds on ballots across the state in more than a dozen counties, and all of them passed. Sales tax referendums were not so lucky. A total of ten counties had the optional quarter-cent sales tax on the ballot, and only two counties decided to pass the tax increase.

    These two local government issues are similar in that one is a tax increase while the other is an increase in spending that is likely to lead to a tax increase. When a local government's board decides to fund government operations they can choose from a long list of options for the necessary revenue, the most common being raising taxes, using existing tax revenue, or issuing new debt.

    During this election cycle, many decided to offer general obligation bonds to pay for schools, streets and sidewalks, parks and recreation, water systems, and other items. While some might argue that these are appropriate functions of government, should debt be issued to fund these initiatives? General obligation bonds are a general obligation of the citizens of the taxing jurisdiction. So while they offer the lowest interest rate of available debt vehicles, they are supported by all the taxing power of the local government. According to North Carolina law, a general obligation pledge is not subject to the $1.50 per $100 valuation property tax rate limitation. So will property taxes increase to pay for these bonds?

    Iredell County has already said property taxes will increase nearly 9 percent, Raleigh will increase taxes by more than 4 percent, the town of Blowing Rock will increase theirs by 3 percent per year for the next 10 years, and the city of Hickory has said the rates will increase but has not given an amount. While cities and counties are not required to increase their property taxes to pay for the bonds, most eventually increase property tax rates to pay for the increased debt service. This is what Cabarrus County said about their bonds,


    When local governments are spending "above-and-beyond the scope of the annual operating budget," it is hard not to believe that all bond referendums will eventually lead to property tax increases. In total, bonds passed during the November 4th election will increase local county and municipal debt by over $1 billion.

    Here are the results from the November 4th, 2014 bond referendums:

Counties and Municipalities	Bond/Purpose	Amount	Result
Cabarrus	Community College	9 million	Pass
Cabarrus	School	11 million	Pass
Caldwell/Watauga
Blowing Rock	Water Systems	2 million	Pass
Blowing Rock	Sanitary Sewer Systems	1 Million	Pass
Blowing Rock	Streets and Sidewalks	9 million	Pass
Blowing Rock	Parks and Recreation Facilities	1 million	Pass
Catawba
Hickory	Streets and Sidewalk	25 million	Pass
Hickory	Economic Development	15 million	Pass
Wake/Durham
Raleigh	Parks and Recreational Facilities	91.775 million	Pass
Forsyth
Winston-Salem	Street and Sidewalk	42.35 million	Pass
Winston-Salem	Parks and Recreation	30.85 million	Pass
Winston-Salem	Housing	10 million	Pass
Winston-Salem	Economic Development	25 million	Pass
Winston-Salem	Public Safety Facilities	31 million	Pass
Franklin/Wake
Wake Forest	Street and Sidewalk Improvement	6.3 million	Pass
Wake Forest	Parks and Recreation	14.2 million	Pass
Wake Forest	Greenway Improvement	4.6 million	Pass
Harnett	School	100 million	Pass
Iredell	School	119.5 million	Pass
Iredell	Community College	12 million	Pass
Lee	CCCC Health Science Bldg	9 million	Pass
Lee	CCCC Veterinary Medical Technology Building	5 million	Pass
Lee	CCCC Emergency Services & Campus Facilities	4 million	Pass
Lee	CCCC Civic Center and Business Incubator	5 million	Pass
Mecklenburg
Charlotte	Public Improvement	110.965 million	Pass
Charlotte	Housing	15 million	Pass
Charlotte	Neighborhood Improvement	20 million	Pass
New Hanover	School	160 million	Pass
Wilmington	Street and Sidewalk	44 million	Pass
Pender	School	75 million	Pass

    Sales taxes did not fare so well during this election. Only two of the ten counties with a sales tax increase on the ballot saw that measure passed. Anson and Ashe Counties increased their sales taxes by a quarter-cent, making their combined local and state sales taxes 7 percent. While the two that passed were tight races, many of those that failed did so overwhelmingly. Since the 2007 legislation that gave counties an option to vote for a quarter-cent sales tax, there have been 106 referendums held in 66 counties. Of those 106, 29 have been approved.

    Here are the results for the sales tax referendums. Remember, while all the counties gave a reason for the sales tax increase, there is no legal restriction requiring the governing board to spend the additional revenue on these specific projects. The additional funds will go into the county's overall revenue and be distributed based upon the current boards budget, regardless of what was promised during the election.

County	# of Attempts	Reason	Result
Anson	2nd	Increasing teacher supplements	Pass; 52-48
Ashe	1st	Subsidy for Ashe Memorial Hospital	Pass; 53-47
Bertie	2nd	Help meet existing debt service payments and to make improvements to aging infrastructure	Fail; 55-45
Bladen	3rd	Capital improvements for education, jail, emergency medical services	Fail; 71-29
Carteret	1st	Dredging and waterway care	Fail; 55-45
Guilford	4th	Funding classroom teachers, making repairs and maintaining school facilities, buying more supplies and textbooks, increasing teacher compensation and incentives, and improving school security	Fail; 57-43
Mecklenburg	1st	80% would go to raise the pay of Charlotte-Mecklenburg Schools employees, 7.5% to raise pay at Central Piedmont Community College and 7.5% to the Arts and Science Council, and the remaining to the county's public libraries	Fail; 61-39
Richmond	1st	Recrational complex	Fail; 70-30
Rockingham	2nd	School construction, repairs, equipment, and debt repayment for both the public schools and the community college	Fail; 74-26
Stanly	2nd	Pay debt and capital expenses associated with the construction, operation and maintenance of a new public safety/911 emergency radio communications system and related radios	Fail; 58-42

    Many of the counties that had a sales tax on the ballot also had bonds on the ballot. While all the bonds passed, the sales taxes did not. It leads one to think that counties and cities have learned that citizens are more likely to vote for a bond, which will eventually raise their property taxes, instead of voting for an immediate sales tax increase. Bond referendums should be required to disclose the amount the property tax will increase to pay for the bond. If that change was implemented, would bonds pass as frequently as they do under the current system? Maybe it's time citizens voting for a property tax increase through a bond are given all the information -- as is the case with the sales tax.