Point of View

Unfortunate policies lead county to a paler shade of Orange

April 20, 2013 


One irrefutable message of our last presidential election is that the complexion of our country is changing. The growth in the nonwhite population across America has dwarfed the increase in Caucasians. We are truly becoming a racially diverse nation.

Except in Orange County.

Of the 25 largest counties in North Carolina, only two had a decline in African-American population over the last decade. Of the two outliers (which happen to be the two most “progressive” counties in the state) the one that saw the largest drop in its black population was Orange County. The other was Buncombe.

It is no secret that there is a significant wealth disparity between blacks and whites in America. A recent Brandeis University study showed that the primary factor driving the wealth disparity is the number of years of home ownership, which accounts for 27 percent of the racial wealth gap, an even higher percentage than family income. So, by definition, a community that fails to offer an affordable cost-of-living to homeowners will struggle with diversity.

Orange County is the most expensive place to live in North Carolina by a wide margin. Benchmarking Orange County and Chapel Hill against the 25 largest counties and cities, respectively, in North Carolina shows:

• Orange County has the second-highest property tax rate. After Chapel Hill takes an additional bite, the average Chapel Hill resident pays about 30 percent more in property taxes than anyone else in the state.

• Orange County has the highest sales tax rate in North Carolina, yet has the lowest percentage of its budget derived from sales tax revenues, a curious paradox. The reason is that residents have to leave the county to spend their money. The anti-business development policies in the community force residents to “gift” millions of sales tax dollars annually to neighboring counties where retailers are clustered just across the county line.

• OWASA has the highest water rates in the state for homeowners. Because OWASA’s pricing grid is steeply progressive, its rates are within the range of reasonableness for a transient single college student who pays no taxes in the community, but they are off the charts for families with children and home owners.

• Orange County has the second-highest per capita allocation to capital expenditures, near the top in all categories except public safety, where it is near the bottom.

The county spends more on waste management per person than any other county, over twice the state average.

• While the rest of the world is de-leveraging, Chapel Hill’s debt payments per capita have tripled since 2006.

• Of the 128 companies that planned to locate or expand in the RTP area in 2011, only one planned to do so in Orange County despite the fact that it has the most highly educated work force in the state.

The exorbitant cost of living, brought about by conscious policy decisions, is toxic for economic and racial diversity. Isn’t it ironic that a community that preaches social inclusion enacts policies of economic exclusion?

Demanding ransom payments from developers who are forced to ante up for low-income housing in order to get approval to build in the community may make local officials feel better about themselves, but it is spitting into the wind. This tactic only drives up the cost and price of the units that are built.

Officials wonder why so many of the “affordable homes” sit empty. It is because people who qualify for affordable housing can’t afford local water bills and property taxes. They don’t shop for groceries at Fresh Market, Whole Foods and Weaver Street Market. Lower income residents shop at Wal-Mart, and Chapel Hill is much too Bourgeois to allow one of those to be built in the community.

Recently, I spoke with a young UNC grad who works with the underprivileged in Chapel Hill. She chose this job over numerous lucrative offers because of the relationships the position afforded her with people less fortunate than herself. One of her favorite locals is an African-American man who lived in subsidized housing in Chapel Hill. She was inspired by his optimism about life. So she was devastated to learn that he had decided to move to Durham. His family could no longer afford their water bill. He determined it would be cheaper to live across the county border and commute to Chapel Hill for social services than to pay OWASA’s usurious rates.

The obvious solution for elected officials is to act to bring the county’s cost of living in line with the rest of the state. They could set the bar really low; perhaps shoot to be next-to-last in any expense metric. But Chapel Hill and Orange County are such outliers, even a modest goal would require a new paradigm for elected officials. There are no structural barriers to lowering the cost of living despite the countless excuses routinely provided. The only obstacles are political.

Unfortunately, a viable solution is not on their radar. The fix being bantered about in Chapel Hill is to further raise property taxes to expand the affordable housing fund. In other words, since the economic environment is hostile to diversity, let’s manufacture diversity, even though our affordable housing policy is clearly not working. The only thing worse than ignoring a serious social issue is a Band-Aid fix that compounds the underlying problem.

Michael Jacobs is a professor in the MBA program at UNC and a former U.S. Treasury official. He was recently appointed to the N.C. Financial Literacy Council.

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