Schools miss out on tax break

Spat with county costs big bucks

RALEIGH -- Haggling between the Wake school system and the county government has cost taxpayers an estimated $400,000 -- a figure that could rise to the millions if the two sides don't work together.

In March, the school board and Wake commissioners approved an agreement aimed at taking advantage of a state law that allows counties to claim refunds for state sales taxes.

School systems don't get the benefit directly. But by temporarily transferring the deed for a future school site to the county during construction, the county can get a refund on all sales taxes paid on building materials and such fixtures as new furniture and computers.

When the new school is ready to open, under the agreement, the county would transfer ownership back to the school system.

With plans in place to spend more than $1 billion on building or extensively renovating schools by 2010, Wake officials estimate the arrangement could save local taxpayers up to $13 million in sales taxes reclaimed from state coffers.

But the agreement signed by the two boards in March has not yet been implemented, and school construction projects are proceeding without the deed transfers being made.

"There's been some lag time," Assistant County Manager Joe Durham said Friday. "Our goal, of course, is to make sure this happens as soon as possible so that these cost savings can be realized."

A sticking point has been what type of deed the school system would use to transfer the property.

The agreement signed in March calls for the schools to convey property using a special warranty deed. School officials told county officials earlier this month, however, that the system wants to use quitclaim deeds.

A special warranty deed is a more secure form of title than a quitclaim deed, but it can also take more time and effort.

The county, however, has not budged from the original agreement calling for special warranty deeds.

Durham said that in a conference call between the two sides late last week, the county received verbal commitments from school system administrators that they would provide special warranty deeds after all.

Written confirmation, expected in the form of a letter from schools Superintendent Del Burns to Wake manager David Cooke, had not been received by the county as of 5 p.m. Friday, Durham said.

The longer the process takes, the more sales taxes will be paid unnecessarily.

"Until we get title, we can't do the sales tax refunds," Durham said.