State Politics

July 22, 2014

Raleigh mayor says NC Senate bill would hurt Wake's ability to handle growth

Most counties would have new options for raising sales taxes, but Wake and other urban counties would see new restrictions on local taxes under a bill expected to go to the Senate floor Wednesday.

Wake County will have a harder time handling growth pressures and transportation problems if the legislature adopts a Senate proposal to put new restrictions on local sales tax options, Raleigh Mayor Nancy McFarlane said Tuesday.

"I am disappointed that they're continuing to take away the tools we have at the local level," McFarlane said. "They're even restricting the ability to take things to a referendum, which is really the ability to ask the voters if they want to fund something."

A House bill amended Tuesday evening in the Senate Finance Committee would change the options all counties have for levying new local sales taxes, and it would set the tax rate limit at 2.5 percent. Most rural counties would get broader flexibility to levy sales taxes. But the bill would reduce the authority for local sales taxes in Wake and three other urban counties, now set at 2.75 percent.

Wake collects a 2 percent local sales tax now. Wake County commissioners have discussed the possibility of asking voters to approve a one-quarter percent sales tax to boost teacher salaries this year, and a one-half percent tax for major investments in bus and rail transit service next year. Those options would be constrained under the Senate proposal.

"That's frustrating," McFarlane said. "An area like Wake is seeing explosive growth. And anyone that's driving on U.S. 1 or I-40 knows we're facing transportation issues. They're not going away. It's important at the local level to have the tools to deal with it."

The bill cleared the Senate Finance Committee on a split voice vote. Among those voting against it were Wake Sens. Tamara Barringer, a Cary Republican, and Josh Stein and Dan Blue, both Raleigh Democrats.

Blue argued that the bill would effectively roll back the authority the legislature gave a handful of urban counties several years ago for a half-cent sales tax for bus and rail transit investments.

He said Orange and Durham are counting on Wake County to join them in approving the half-cent tax for local and regional transit service, but doing so would rule out a quarter-cent tax to raise teacher pay.

Sen. Rick Gunn, a Burlington Republican, replied that the 2.5-percent ceiling would "level the playing field" for poor rural counties and affluent urban counties.

"I'm glad our large counties are doing well, but we do have a large number of rural counties that do need a little help," Gunn said. "I think this plan will help both of them."

Orange and Durham would be allowed to keep their current sales tax levies of 2.75 percent apiece. Mecklenburg would see its ceiling drop to its current rate, 2.5 percent. Forsyth and Guilford - like Wake - now collect 2 percent and would see their allowable tax caps fall from 2.75 to 2.5 percent.

House leaders have not said whether they would support the sales-tax changes, which were added in the Senate to an unrelated House bill. The measure would give counties new options for combinations of quarter- or half-cent sales taxes targeted at education, transit or general-purpose use.

Stein said the Senate proposal would lead to sales tax hikes in rural counties.

"Why, when you make it easy for the sales tax to go up elsewhere, are you tying the hands of Wake County?" Stein said.

Sen. Chad Barefoot, a Wake Forest Republican whose district includes rural Franklin County along with parts of Wake, voted to move the bill out of committee but said he had not decided how he will vote on the Senate floor. Franklin County has a high property tax rate, he said, and is one of the rural counties that might benefit from new options to increase the sales tax.

"I've got a lot of considerations," Barefoot said. "I'm still reaching out to stakeholders."

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