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MY VIEW:
Published: Jul 26, 2009 12:30 AM
Modified: Jul 25, 2009 11:08 PM
Putting taxes in neutral?
Raleigh didn't raise property taxes for next year. Neither did Wake County, nor Cary, nor Apex, nor the City of Durham, nor Durham County.But, in the midst of the worst recession in decades, 2010 budgets for Orange County, Chapel Hill, Carrboro and Hillsborough all included property tax increases.You'll be forgiven if you didn't notice this. The revaluation and the subsequent adjustment of tax rates made it very hard to get an apples-to-apples comparison of next year's taxes versus this year's.Here's how the process works. To prevent governments from profiting from a revaluation, they must calculate a reduced tax rate to offset increased property values. It's called a "revenue neutral" rate and all Orange County governments adopted one for their new budgets.This seems pretty straightforward. But as we learned during the budgeting process, when it comes to taxing your home, there's nothing neutral about the "revenue neutral" tax. Rather, the formula is designed to preserve revenues from taxes on all property, including motor vehicles, personal property, and public utilities.Next year, revenues from those other categories are projected to go down. Therefore, the tax on your real estate will go up to cover for them.To make matters worse, the formula then piles on a "growth factor." In anticipation of future development, the new rate is multiplied by the average tax base growth over the last three years. Never mind no one is seriously projecting past growth rates to continue any time in the near future. The rate goes up even if the base stays flat.Confused yet? Perhaps that's the point. When politicians need to deliver bad news they find refuge in obfuscation.Here's the simplest way to put it. In any other year -- one without a revaluation -- each of these local adopted budgets would have plainly and openly shown a property tax rate increase. This year, our elected officials used this Rube Goldberg "revenue neutral" formula as a stealth bomber to deliver higher taxes.How much was the rate really raised? This will give you some idea:In Chapel Hill, the average valuation increased 28.6 percent, but the tax rate only declined 15 percent. Chapel Hill taxes, on the average priced property, will rise 9.3 percent.In Carrboro, the average valuation increased 26.0 percent, but the tax rate only declined 14.1 percent. Carrboro taxes, on the average priced property, will rise 8.2 percent.In Hillsborough, the average valuation increased 22.6 percent, but the tax rate only declined 7.5 percent. Hillsborough taxes, on the average priced property, will rise 13.5%.For all Orange County, the average valuation increased 24.7 percent, but the tax rate only declined 14.0 percent. County taxes, on the average priced property, will rise 7.2 percent.To make matters worse, if your property revaluation was greater than average, your taxes will shoot up even higher.This arcane procedure, murky and confusing, is disappointingly opaque for elected officials who venerate, indeed extol, transparency. Local governments may be required to publish the "revenue neutral" rate, but aren't required to adopt it. Any one of them could have calculated a truly neutral rate for homeowners. They could have effectively held the line on tax increases -- just like all our neighbors -- indeed most of the state -- managed to do.Instead, Orange County residents, already bearing one of the highest tax loads in the state, will see taxes ratcheted up again, adding to their burden like a peine forte et dure.The new tax bills will bring unpleasant surprises to mailboxes in September. Don't be surprised if this makes things unpleasant at ballot boxes in November.
Mark Zimmerman is a small business owner in the real estate industry in Chapel Hill. He can be reached at markzimmerman@nc.rr.com or his blog:
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