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The tax consequences of Chatham County's failed economic development

By John Hammond
Posted Thursday, April 21, 2005

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The tax turkeys come home to roost

The tax consequences of the Bunkey Morgan led economic development policy of the majority of our county board, based on residential development alone, are now visible for all to see. Taxpayers are facing a $153 million in immediate capital outlays resulting from this policy. And this is just the beginning.

All of our incumbent county commissioners who choose to face the voters in the 2006 election ran in the past on a "no new tax pledge" and on the false concept that residential development pays for itself. Surely they won't try this tax ploy platform in 2006. As they now know or should have known then, there are no independent professional studies of the residential development costs that support the idea that residential development pays its own way.

Further based on the tax hole that the county is now in provides another "real life" example that these studies are correct.

The major personal challenge for our incumbent commissioners is how keep all these tax turkeys from coming home to roost before next election. County Commissioner Chairman Bunkey Morgan is clearly giving this tax delaying strategy his best shot.

The unmet needs for the county include $103 million for new schools and 50 M in capital for deferred needs for other county departments such as the courts, social services, etc. Mr. Morgan has tried to patch together a plan based on raising building impact tax. In addition, Morgan's plan includes a request that the state legislature to give the county the authority to raise the county sales tax by another 1%, as well raising property taxes about five cents on the dollar. These actions are part of the scheme to hide as much as possible the full impact of their development policy before the 2006 election. This irresponsible plan will leave Chatham citizens to face
remaining unfunded tax liability of $58-60 M for capital construction until after the election. It is clear why Morgan and his fellow majority on the board will do anything to avoid a referendum of the taxpayers on these count facility needs - it would be a clear admission that they have not been telling the taxpayers the TRUTH ABOUT THE TRUE COSTS OF RESIDENTIAL DEVELOPMENT.

It is fair to look to new residential development to pay for itself and that all these costs should not be born solely by property tax increases. It is also fair to look for the most progressive form of taxes available so that low and moderate-income "working families" do not pay a disproportionate share and are priced out of the homes. It is equally fair to spread out the burden as much as possible Commissioners Mike Cross and Patrick Barnes are leading a lobbying effort to get the state legislature to give Chatham the authority to implement a 1% real estate a transfer tax based on the value of a person's property. Impact fees, in contrast, can only be uniform flat fees paid at the time a building permit is issued. Clearly, a transfer tax is a fairer and more progressive form of taxation than impact fees or property taxes. Yet, only Mr. Morgan opposes this tax. Why? I would suggest that is because his re-election will be bankrolled by outside real estate and building interests.

Of course, all these tax plans are likely to be too little and too late. Despite local support from the building industry and many realtors in
Chatham, the state's two most powerful lobbies, the North Carolina Association of Realtors and North Carolina Association of Homebuilders, continue to brag how they have and will defeat all county attempts to obtain transfer tax authority. I hope our county lobbying effort can overcome Mr. Morgan's and his state sprawl lobby friends and provide us with the transfer tax tool. But it more likely homeowner interests will again be trumped by real estate interests and our local needs will again be met increasing the property taxes on all property owners in Chatham. After all, it's the American way that special interests get rich and the public gets the tax bill.

Remember, as Mr. Cross has pointed out, the $153 M in community infrastructure needs does not include the costs of Powell Place, River Oaks, Booth Mountain or Williams Pond residential developments. Thus, this first tax liability is only a down payment on many millions in tax increases yet come.

The only way to gain control of the tax situation is stop digging your tax hole deeper by approving more residential developments. It is time for a countywide moratorium on residential construction. During this moratorium Chatham should concentrate its efforts to achieve fully functional three pronged approach to economic development.

Fully functioning economic development is like a three-legged stool, one leg is residential, and the other two legs are commercial and
manufacturing/industrial, including farming. Whereas the first leg costs more in community services than it produces in tax revenue, the other two produce more in taxes than they consume in community services. For a county to have stable tax rates all three legs must be grown at the same time. When one attempts to balance only on the residential development leg the stool collapses and everyone will pay forever, increasing property taxes. Chapel Hill is classic example of this problem in that there is little commercial development or manufacturing development and its major employer is the tax exempt UNC-CH and thus most community costs are bourn by the property taxes.

The Chatham Economic Development Commission [EDC] consumes $164,000.00 per year in tax money and has yet to recruit few, if any, new jobs in the commercial or manufacturing sectors in our county. In terms of new jobs paying a living wage Chatham is worse off that it was before the EDC was established in spite of hundreds of thousands of dollars that have poured down the EDC hole. The County Commissioners have been poor stewards of the taxpayer's money by failing to adequately control and supervise this unaccountable and non-productive economic development corporation. Under the proposed moratorium new residential construction should only be approved as growth in the commercial and industrial development sectors make it possible to minimized impact of residential growth on the tax rate. Mr. Morgan is casting about for ways to put a best face on the Siler City Business Park that has been a white elephant since its inception. The purpose of a business park is to attract TAX paying business to the Siler City and thus build the tax base of the city and the county. Commissioner Morgan and his EDC collogues have been unable to do that. In his personal ad in the Chatham Record Mr. Morgan touts the success recruiting county and state agencies and other non-profits to the Siler City Business Park. Only one of entities will be new to Siler City- the state juvenile detention center. Thus, the county, as well as the city's tax base, will gain little in new tax revenues for these expenditures. If this use of the Siler City Business Park is his concept of a model for economic development project, then the county is in great trouble. This is clearly a salvage operation, not a forward-looking economic development initiative. It is unlikely that an industrial park containing a juvenile detention center, a county hospital and a community college extension will attract quality private businesses that pay good wages.

As in the case of Chapel Hill cited above, the failure to mount a real three-pronged economic development plan dooms the county to every increasing property tax. The increasing costs of the one legged economic development stool of residential development will continue to be borne by taxpayers. This tax burden will fall hardest on the cash poor/land rich rural taxpayers.

It is clear the Mr. Morgan's recent maneuvers and ad are aimed at a short term "fix" with the intent to hide his failed residential development policy that has left the citizen holding a large and expanding tax bag. The question is will the voters of Chatham County let him and his other incumbents get away with it?

 
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