November was an expensive month for Orange County residents.
We voted for bonds to fund the schools and affordable housing. We also learned that state and federal funding for the Durham-Orange County Light Rail Project has been reduced and that local governments may be asked to bridge the $254 million gap at some point in the future.
And in Chapel Hill, the Town Council began contemplating the $7.9 million purchase of the American Legion property, and approved the purchase Dec. 5.
In a perfect world, we would have widely available transit, well-maintained schools, sufficient affordable housing, and easily-accessed parks in every corner of the community. But this isn’t a perfect world.
The question I am hearing asked repeatedly is “how much more can we afford?”
Not surprisingly, there are lots of opinions. Some think the county needs to fully fund the school systems so they can pay their teacher and administrators dependable, professional salaries. Others think the local governments should invest more toward affordable housing.
In this climate of economic uncertainty, the growing costs of the light rail project strike many as a boondoggle. Others feel that light rail will help achieve greater affordability.
But we aren’t Congress. We are neighbors, and we need a way to talk about these differences of opinions with an eye toward consensus building. It may not be possible to compare the costs and benefits of light rail to school funding, but there is a way to estimate the impact of new taxation before we commit to new services/projects.
At OWASA we include an affordability index in our key performance portal. We adopted this index as part of our commitment to sustainability. It is calculated as the ratio of average water bill to median income. Our target is less than 1.5 percent. The Southern California Association of Governments calculates a community affordability index as the ratio of housing plus transportation costs and dividing by median income. Their target is less than 2 percent. Indexes like these serve as a benchmark, or a measure against which to assess what impact financial decisions will have on a value we hold dear.
By using an affordability index, our local officials could simulate a cause and effect relationship to help with informed decision making.
What would a local affordability index look like?
In 2015, Orange County collected $152,694,671 in property taxes. The County Economic Development Office reports the median income as $75,056 and total county population of 141,596. If we divide the property taxes collected by total population, the county per capita tax bill is $1,078.38. The ratio of taxes to income is 1.44 percent. Using the OWASA target indicates that for those at or above the median income, county taxes are still affordable.
However, if we add in city taxes the story changes. The residents of Chapel Hill paid $29,535,000 in property tax last year. The most recent population estimate I can find is 57,233 meaning that per capita tax collections are $516.05 in addition to the $1,078.38 from the county. That makes our theoretical 2015 tax bill for a Chapel Hill resident somewhere around $1,595 and, based on the county-reported median income, gives an affordability ratio of 2 percent.
What this thought experiment demonstrates is that those who earn at or above the median income are bumping up against affordability at the current level of local taxation.
Obviously, this type of index is a gross generalization. It tells a broad story, but not the whole story. If, instead of using the median income, we use the 80 percent of AMI for a family of four as calculated by the Community Home Trust ($56,550), the affordability ratio is close to 3 percent.
By using an affordability index, our local officials could simulate a cause and effect relationship to help with informed decision making. For example, they could investigate the impact of a 3 to 4 cent tax increase on real people. By weighing the impact of their financial decisions with a metric that residents have access to, it makes these decisions more transparent.
I wonder what the impact of a 3 to 4 cent tax increase for the newly approved bonds will have on the individuals and families who qualify for affordable housing? And will that impact be worth the new construction at Chapel Hill High School and Lincoln Center?