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The original item was published from 5/27/2015 2:14:00 PM to 7/1/2015 12:10:00 AM.

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Posted on: May 27, 2015

[ARCHIVED] N.C. Senate Bill Could Lead to Town Tax Increase

The Holly Springs Town Council opposes N.C. Senate Bill 369 because Holly Springs could face a loss of about $1.6 million every year starting in 2018 if the bill, titled “Sales Tax Fairness Act,” is passed into law as written.

That lost revenue would translate into roughly a 5-cent property tax increase for local residents if the state of North Carolina effectively takes sales tax revenues from here and redistributes elsewhere in the state.

While the Town Council authorized a letter stating its collective position on the bill, local officials feel letters from constituents in the Town would have a bigger impact.

See a sample letter and contact information for our representatives in the legislature.

Senate Bill 369

News reports estimate that cities could face a statewide loss of nearly $120 million. While some towns in rural areas where the economy is not as vibrant would gain revenue, others would lose revenue under the terms of the bill, which converts the locally levied sales tax to a state sales tax and distributes it on a per capita basis around the state. Overall, though, the result is a $120 million loss of city revenue.

A report from the North Carolina League of Municipalities states that much of the loss can likely be attributed to the absence of any city hold harmless payment from counties once the bill is fully implemented. That payment from counties to cities is made so that cities receive revenues equivalent to which they would have received under the Article 44 sales tax, which was converted to a state sales tax in exchange for the state’s assuming Medicaid funding responsibilities. However, the amount of that payment is calculated based on articles of local sales tax that are repealed by SB 369, leaving no basis for calculating an amount of those payments once the bill is implemented. Additionally, some cities are hurt by the bill's mandate that counties distribute sales taxes to the cities within their borders on a per capita basis.

The League also is concerned about SB 369's conversion of the local sales tax to a state sales tax that is allocated to local governments. This eliminates a locally levied tax and puts city sales tax distributions fully under state control and subject to the annual appropriations process – which generally places cities squarely at the bottom of the list of priorities.

SB 369 was referred March 24 to the Senate Committee on Finance.

League staff is having discussions with sponsors of SB 369, legislative leadership and staff and will continue to advocate for additional municipal revenue options that maintain locally controlled revenues and provide stability and flexibility for municipalities going forward.

But the League could use our help. Elected officials and private citizens are urged to contact our Wake County delegation to voice opposition to this proposal that could significantly impact Holly Springs and hundreds of N.C.'s cities and towns.

See a sample letter and contact information for our representatives in the N.C. General Assembly.

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