News & Observer | newsobserver.com | Choices are fewer after tax thumped at polls

Published: Nov 08, 2007 12:00 AM
Modified: Nov 08, 2007 05:15 AM

Choices are fewer after tax thumped at polls

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The tanking of real-estate transfer tax proposals across the state Tuesday bodes poorly for Triangle politicians looking for ways to pay for public schools and the region's rising growth tab.

If a tax on the home sales won't fly at the polls, they say, the burgeoning region will have trouble keeping up with growth.

Without a transfer tax or other revenue source, officials grappling with growth face an unpalatable choice: raise existing taxes or let key services lag. Alternatives include raising property taxes, having a sales-tax referendum, cutting school costs dramatically or accepting more crowded schools and congested roads.

"That's a real possibility, and I don't think it has dawned on enough people yet," said Ellis Hankins, executive director of the N.C. League of Municipalities.

There's a disconnect, he said, between the public's unhappiness about the pains of rapid growth and its unwillingness to approve new taxes to pay for upgrades to accommodate that development. Johnston and Chatham counties were among 16 that rejected the tax Tuesday.

"We have more and more people who expect high-quality public services, but they're not always willing to pay the cost," Hankins said. "It's human nature. We need to do a better job of educating them that the public services they expect have to be paid for somehow."

Opponents, however, were emboldened. If politicians in fast-growing Wake County dare put a transfer-tax referendum on the ballot next year, they'll have trouble staying in office, Dallas Woodhouse, state director of Americans for Prosperity North Carolina, said at a Wednesday news conference in Raleigh.

"If they put a tax on the ballot, it'll get defeated," he said. "And so will some of the commissioners."

Wake commissioners' Chairman Tony Gurley said voters' overwhelming rejection of transfer taxes in all 16 counties where they were on the ballot was sobering.

"It was an eye-opener to see every single county turn it down by such wide margins," he said. "I think we will be very hesitant to offer the transfer tax to Wake County voters if we're not confident that it will pass."

In Wake, a sales-tax increase might be more palatable than raising property taxes, he said. Voters in five other counties approved higher sales taxes Tuesday. But with Wake facing an estimated $11 billion shortfall in funding for schools, roads, open space, and water and sewer service during the next 25 years, something has to give.

"It would be nice to have some additional revenue sources to catch up," Gurley said.

Charlotte and Mecklenburg County might offer Wake a lesson. By a margin of 7 to 3, voters there rejected an effort to repeal the county's half-cent sales tax, which generates $70 million a year for public bus and rail transit. The vote came after an intense publicity campaign specifying what the tax buys -- and warning what would be lost without it.

"They were educated on what this half cent goes for and what it means for the future of transportation in Mecklenburg County," said state Rep. Becky Carney, a Charlotte Democrat.

That sort of educational push was generally absent in the 16 counties where the N.C. Association of Realtors, home builders and tax critics spent heavily, worked hard and successfully rallied opponents of the proposed transfer tax.

"Some of these other votes were counties simply saying, 'We need more of your tax money,' " said former Raleigh Mayor Smedes York. "They may not have been specific enough."

The Charlotte vote gave hope to a Triangle citizens' committee that is drafting a multibillion-dollar plan to extend rail, bus and streetcar service across the region over the next 30 years.

"Charlotte's congestion is probably worse than ours, but it's not worse than ours is going to get," said York, a member of the Triangle panel. "I think they realize that they've got to have transit in addition to roads. And I think that's what we are realizing."

Winners celebrate

The Realtors association, home builders and tax opponents, meanwhile, celebrated their defeat of transfer taxes.

"The good guys went 16-0 last night -- and all of them were blowouts," Tim Kent, chief executive of the N.C. Association of Realtors, said at a news conference in Raleigh. "Last night was an incredible victory for home-ownership and the protection of private property rights in our state. People sent the message that they absolutely do not want a targeted tax."

Advocates of slower growth weren't happy with the results.

"I've had better days," said Stan Norwalk, vice chairman of WakeUp Wake County. "We're in a terrible mess, and we haven't moved an inch toward a solution."

County leaders would be smart, he said, to couple a transfer tax vote with a school bond referendum -- and a pledge to spend the transfer tax on schools.

"We'll either raise taxes or reduce service levels," he said. "There is no other option."

(Staff writer Bruce Siceloff contributed to this report.)

Staff writer Bruce Siceloff contributed to this report.

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