Local News

State's Tax Surplus Doesn't Translate To Higher Local Revenues

Posted May 18, 2006

— While state leaders contemplate ways to spend a $2 billion surplus, local leaders want help. They may not get it from the state, so they could end up changing the way they tax.

State government's funding fuel is the tax on what people in the state buy and earn. When the economy thrives, so do state coffers.

Contrast that with local communities, who collect their primary revenue from property taxes. It's a steady source, but rarely keeps pace when population growth drives the need for new police officers and schools.

"Wake County is actually taxing people right now on their house values as they were in 2000," said North Carolina State economist Dr. Mike Walden.

Walden pointed out most North Carolina counties revalue property every eight years. By the end of that cycle, local leaders often struggle to keep up with needs, even with new construction.

Walden serves on a blue ribbon commission looking at Wake County's infrastructure.

"One of our recommendations is going to a four-year revaluation," said Walden.

League of Municipalities Executive Director Ellis Hankins said his members are asking about some payback.

"There's a long list of needs that have built up. Cities and towns have those needs too," said Hankins.

When state government struggled through deficits just a few years ago, Gov. Mike Easley withheld more than $200 million dedicated to local government to balance the books. As Easley downplayed the current surplus, he said he'd help with schools and roads, but not old debts.

"The idea that we'd go back and try to fix a shortfall from four to five years ago is just out of the question," said Easley.

"The governor hasn't told me that," said Hankins. "Maybe we should have that conversation with him."

Property owners could be in for a tax sticker shock. In addition to a possible tax rate hike, Wake County's next scheduled revaluation goes into effect in 2008. Higher values likely mean higher tax bills.


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