Durham County approves property-tax relief. Did it pick the best plan?

Durham resident Camillia Foust thought Southside was changing, when in 2016 she saw new houses being built on the corner of her block. She heard from neighbors that their property taxes would rise.

They were right.

Her combined city and county property tax bill grew by $400 last year, while some of her neighbors’ bills increased by $600 to $700, said Foust, president of the Southside Neighborhood Organization.

Some of her elderly neighbors got letters and phone calls from people asking to buy their properties, she said. Seniors were scared they would have to sell their homes.

“We just want to be treated fairly, and we don’t want to be forced to give up a house,” Foust said.

On Monday, Durham County approved a plan to help homeowners like Foust, who bear the brunt of Durham’s gentrification.

But the option the county commissioners chose in a 3-2 vote Monday is so burdensome that few homeowners will use it, say those who pushed for a different choice.

Property taxes are contributing to the displacement of long-time homeowners, the commissioners agreed. The tax value of the average home in the county rose by over 26% in 2019, with the biggest increases in historically Black neighborhoods like Braggtown and Southside, according to Durham Neighborhood Compass data.

To help, the board considered three tax-relief options.

▪ Tax assistance grants

▪ Long-term payment plan deferrals

▪ Expanding participation within the Durham Community Land Trust.

After a lengthy debate focusing on the first two options, Commissioners James Hill, Brenda Howerton and Ellen Reckhow voted for the deferral plan.

County Chair Wendy Jacobs and Commissioner Heidi Carter voted against it.

Concerns with racial equity and legality

Jacobs and Carter doubted whether homeowners would actually sign up for the deferral plan.

“At the end of the day what we want to really do is help people,” Jacobs said. “And we don’t want to come up with a program that people aren’t going to use.”

Under the plan, homeowners who meet certain conditions will pay the county only 4% of their annual income in property taxes. They can defer, or postpone paying, the rest, including interest and fees, for up to 10 years.

After 10 years, the homeowners must begin to pay back their deferred balance. In the first year they need to pay the deferred amount and interest from the first year they signed up. The following year, they will pay for their second year’s deferred amount and interest. And the next year, they’ll pay for year three.

A homeowner must have a household income of 30% or less of the Area Median Income to apply. Those who sell their property must pay the balance of all deferred taxes, interests, and fees within 60 days.

The plan puts a lien on a residents’ property and gives them “a very daunting amount of money” to pay after a decade, Jacobs said.

Carter echoed Jacobs concerns.

“If families will even trust it enough to participate in it, and I have a very serious doubt that they will, in the end it is likely to undermine their wealth,” Carter said.

“The only way, if we’re using the racial-equity lens to guide our decision making, would be to go with the grant,” she added.

But Assistant County Attorney Bryan Wardell said it is illegal in North Carolina to offer tax assistance through grants, which unlike loans don’t have to be paid back.

“The sovereignty of taxation is with the state,” he said. “And the only options other than paying your taxes is a bill created by the state and applied uniformly to all 100 counties.”

“It’s an illegal program,” he said. “I don’t care what you call it. I don’t care if you try and shoehorn it into a welfare program. It doesn’t fit.”

Reckhow warned that the courts could hold the commissioners liable if they approved illegal grants.

“I’m going to take the advice of our paid legal staff and not go the route of doing something that may be illegal and actually put us as individuals at risk,” she said.

The tax assistance grant option

Jim Svara spent a year drafting the Longtime Low-Income Homeowner Tax Assistance Program, the grant program the county rejected Monday.

It would cap homeowners’ county property taxes at 1% of household income, with the county paying the rest of the bill.

To qualify, the homeowner’s income must be 30% or less of the Area Median Income for the preceding calendar year and the homeowner also must meet one of these criteria:

▪ own the property for at least 10 years

▪ be at least 65 years old or permanently disabled

▪ have acquired the residence through an affordable-housing program

▪ have acquired the residence through inheritance, with the property owner-occupied for 10 years

The final version of his plan received endorsements from several housing advocacy groups, such as:

▪ The Coalition for Affordable Housing and Transit

▪ Durham Committee on the Affairs of Black People

▪ People’s Alliance

▪ Durham for All

▪ Habitat for Humanity.

▪ Durham Community Land Trustees

Dwane Brinson, Durham county’s tax administrator, estimated the tax assistance grants option would cost the county over $3.7 million a year.

Foregone revenue would make up about $3 million of the expenses.

The deferral option

Brinson told the commissioners the payment-plan option would cost less than grants and be legally sound.

“There’s no loss of revenue from a long-term perspective,” he said, since the deferred payments would be made over time.

“I realize that it’s discouraging, dissuading to think about, ‘If I go into a deferral program, I’m going to be charged interest, and I’m going to be charged this fee,’” he said. “Which is true. We have no recourse to relieve tax, relieve interest, relieve fees.”

The plan is intended for homeowners in their 30s, 40s, and 50s who would not qualify for current state tax-relief programs like the Homestead Exemption and Circuit Breaker deferment plan.

In approving deferred payments the commissioners also told staff to look into ways to help applicants pay off accrued interest and fees. A section could be added to everyone’s tax bill, for example, for those who want to donate $10 to help low-income homeowners, Jacobs said.

Foust, the Southside homeowner, does not support the deferral plan, she said in an interview Tuesday.

Svara called the commissioners’ concerns about grants ”exaggerated.” But he said he will still encourage people to take advantage of the deferral plan.

He will also work to change the program’s ground rules, he said, like the plan’s interest rate, and the number of years required to repay.