Wednesday, 06 May 2020 16:29

DOR: Richmond County municipalities to lose revenue in sales tax distribution switch

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ROCKINGHAM — Four Richmond County municipalities would lose more than 50 percent of their usual revenue from sales taxes — and one would lose all of it — due to a recent change in distribution, according to the N.C. Department of Revenue.


Rockingham City Manager Monty Crump — who was the first to express concern over the Richmond County Board of Commissioners’ unannounced switch-up from distributing sales taxes from from per capita which is based on population, to ad valorem, which is based on property values — requested that the state provide calculations for how the communities would be affected.

“While we do not generally evaluate or judge the estimates made by local governments, we do work to ensure that local governments can understand the law and its effect on the distribution,” Ernest Irving, from the NCDOR Financial Services Division, told Crump in an email dated May 6. 

However, Irving did provide “estimates of the most recent available fiscal year of sales tax data, showing the difference between what would be received under each distribution choice.”

Using figures from 2018-2019, NCDOR estimates that Norman would lose 100%.

Crump called that the “single-most harmful example of the County Commissioners’ action.”

Likewise, Hoffman would lose more than 85%, Dobbins Heights would be out nearly 79%, and Ellerbe’s share would be decreased by more than 55%.

“Based on my 39 years of experience in public finance and discussions with elected officials in the smaller towns, this type of revenue loss does present each smaller town with the very real possibility of facing insolvency,” Crump said.

Both Rockingham and Hamlet would lose more than a half-million each.

Source: N.C. Department of Revenue

 

County Manager Bryan Land previously told Crump that the county would only gain 10%, but figures from the state show an increase of more than 25%.

During the commissioners’ May meeting on Tuesday, Commissioner Rick Watkins said it was “unfortunate” that the conversation surrounding the controversial change in distribution has been focused on the short-term losses and not on the long-term impact and how the county and municipalities “may benefit moving forward if we all plan together to work cooperatively.”

He then proposed that the county retain an independent, third-party accounting firm to study the issue.

“This study will not be limited to county government, but will include all municipalities and townships,” Watkins said, adding that results would be shared no later than Feb. 1 of next year.

The study would include: historical context; methods in research regarding taxation in North Carolina and Richmond County; the ability to pay, of both individuals and government entities; fairness to all taxpayers; equity of tax burden among all governmental entities; short- and long-term tax revenue projections; and recommendations for the future to include taxation strategies that will enhance business, farming and industrial development.

Commissioner Ben Moss asked if the study could include national information, including how many states distribute taxes using the various methods.

Watkins said that North Carolina is one of possibly four states that gives counties the option between ad valorem and per capita.

Last week, Land said that 52 of the state's 100 counties use the ad valorem method.

“I’m open to any third party coming in and giving us some figures,” Moss said. “We have our figures, the municipalities have theirs, but I think it would be a good idea to have a study done and see exactly how this will all play out and maybe get some other opinions.”

Watkins also called for a commitment, including a memorandum of understanding, between the county and the municipalities.

“We need to all work together,” Watkins said. “Like I’ve always said, ‘We’re all Raiders on Friday night,’ so we all need to work together so we can do great things for Richmond County. We need to open up those lines of communication and we need to make sure we’re moving in a positive direction.”

Commissioner Tavares Bostic concurred on bettering the relationship between the commissioners and the municipalities, and suggested several meetings throughout the year “just so that we can get on the same page.”

Commissioner John Garner said before any action is taken, commissioners should know how much the study would cost and who would bear that burden.

“That’s a good question,” Moss said. “Are the municipalities willing to share in the cost of this study? “I’m all for communication and a relationship, but as you well know, it can’t be one-sided, we have to work on it together.”

Board Chairman Kenneth Robinette suggested that the county pay half and the other half be split between Rockingham and Hamlet.

“You tend to be a little more committed if you have some skin in the game,” Watkins said. “So participating in the cost is probably not a bad option.”

Bostic said he was willing to sit down with the two larger municipalities to discuss how important the study will be.

A decision on the study will be made at the June meeting.

“The only right way to work this out is to rescind this action on sales tax distribution and restore this money to the budgets of all the towns and cities in Richmond County,” Crump said. “Richmond County has destroyed a lot of good will with this unilateral action without full knowledge of its impact and a show of good faith will go a long in turning this situation around for the best interest of all citizens.”

 

Last modified on Wednesday, 06 May 2020 16:45