title
Commissioner Brown - Budget/Purchasing - To Approve a Non-Binding Advisory Referendum, Pursuant to Chap.105, Art. 46, for a ¼ cent (0.25 percent) Sales Tax, and Request the Gaston County Board of Elections to Schedule a Referendum for May 8, 2018
body
STAFF CONTACT
Matthew Rhoten - Budget and Purchasing - 704-866-3048
BUDGET IMPACT
budget
N/A
body
BUDGET ORDINANCE IMPACT
N/A
BACKGROUND
When we reviewed the school district’s $250 million bond issue, we publicly stated the upfront projected impact on the tax rate would be
FY 19 FY20 FY21 FY22 FY23 FY24
10.25 cents 0 cents 0 cents 0 cents 0 cents 0 cents
The most cost effective way for the taxpayers is for the county to pay for the debt upfront rather than incrementally over time. Incrementally raising the tax rate over seven years would result in 14 cents as opposed to 10.25 upfront. It costs the taxpayer less to fund the debt with an upfront tax increase opposed to incrementally over time.
If the voters approve the quarter cent sales tax on the referendum, and if the money were dedicated to school capital and debt service - and we deposited the funds into this separate account before the revenue was needed and drew it down when it was needed - the impact on the tax rate from the $250 million upfront would be:
FY19 FY20 FY21 FY22 FY23 FY 24
0.63 cents 0 cents 0 cents 0 cents 0 cents 0 cents
It should be noted however that a tax rate increase is not necessary if the quarter cent is approved. The thought would be to see if revenue projections increase to a sufficient amount over time in order to fund the full $250 million with sales tax revenue only and no property tax increase necessary.
For the median assessed valued of a home, $125,100 that means a savings of $641.14 in property taxes over the five years - and the savings continue every year. For a home worth $300,000 that would be a savings of $1,537.50 for five years. But won’t that “savings” have to be made up by the quarter cent sales tax? Yes, but less than 70% of County residents are homeowners, and not only do 100% pay the sales tax, but some is paid by residents of neighboring counties and by people passing through on the Interstate. Plus, sales taxes are paid pennies at a time, and for an elderly resident on the fixed income, it is a lot easier than an annual lump sum payment for property taxes.
We would therefore recommend that all the proceeds from the quarter cent sales tax be placed into a separate account solely for public school capital and debt service. By using the quarter cent to pay down the debt service, it is providing property tax relief or avoidance. These funds would be accounted for and audited in the County’s annual audit.
POLICY IMPACT
N/A
ATTACHMENTS
N/A