Use of Tax Dollars to Influence Tax Vote Questioned in North Carolina County

Published July 1, 2008

Taxes are an unpopular necessity of government, and elected officials have to communicate their concerns to gain voter support for increased levies. However, the actions of one North Carolina county are raising questions about the use of public funds to promote a tax hike.

Commissioners in Orange County, North Carolina recently committed more than $110,000 in tax dollars toward passage of a controversial real estate tax that had been soundly rejected by voters in every county that suggested it.

In the wake of the measure’s two-to-one rejection in May, Orange County commissioners pondered a second attempt come November. However, state lawmakers from both parties are calling for the option’s repeal, saying repeated efforts to gain approval have only agitated voters with little hope of passage.

Voter OK Required

Last year’s restructuring of Medicaid funding in North Carolina moved a tremendous burden from county budgets to the state, but it also removed a part of the state sales tax that was being routed back to the counties that collected it. In its place, the General Assembly allowed counties to levy a local sales tax or a real estate transfer tax–if the voters approved.

The sales tax option has had limited success, and it became clear last November that voters were not in the mood to approve the real estate tax, rejecting it by substantial margins in all 16 attempts. Undeterred, commissioners in Orange County placed the transfer tax on the May 2008 primary ballot.

Barry Jacobs, chairman of the Orange County Commission, said the “hold harmless” provision of the Medicaid bill hadn’t worked out for his county.

“After the shuffling with Medicaid, school construction funds, and all the things the General Assembly tinkered with, we actually lost money,” Jacobs said.

Failed Effort

Believing the nine weeks from the passage of the Medicaid bill until the November 2007 election was too short a time to make their case with the voters, the commission scheduled the measure in conjunction with the presidential primary in May 2008. In February of this year, they spent $10,000 with a local polling firm to gauge the voters’ response to either tax proposal.

The referendum effort ultimately failed. In a historically high turnout for North Carolina’s primary election, the transfer tax was defeated by a two-to-one margin in Orange County and failed in three other counties the same day.

Resident’s Official Complaint

Although they had expected opposition from the home builders’ and realtors’ associations that had successfully fought the transfer tax in other counties–Jacobs referred to tax opponents as “the biggest financial bullies in North Carolina government” in one news report–Orange County officials were surprised and angered by a local resident’s complaint to the state Board of Elections alleging misuse of county funds.

The petition filed by Michael Griffin of Hillsborough said, “examination of the poll and its questions reveals it is calculated to be used as a tool for advocacy by the Orange County Board of Commissioners for the passage of the land transfer tax,” which puts it in the category of reportable expenditures, according to Griffin’s attorney, John R. Wallace.

Had it been purely an educational effort, Wallace said, the poll would have been designed to identify simple lack of information among voters. Instead, the poll identified objections to the tax and the voters’ preferred media, so a campaign could be designed in response. That expenditure should have been reported to the Board of Elections.

Sharp Denial

Jacobs disputed the allegations, saying he knew “for a fact” that commissioners had not decided on the issue at that time and the poll was “absolutely not a vehicle for propagandizing.”

“You know people often project what they’re doing on others,” Jacobs said. “There is no controversy” about the poll, he asserted, “just a group of people who will take any approach to get their way.”

$100,000 Media Contract

Less than two weeks after Griffin’s March 5 petition, the commission awarded a contract for up to $100,000 to a media firm in Durham to produce a voter educational program, raising further questions about the distinction between education and advocacy. Jacobs confirmed the transfer tax on the first $27.5 million of real estate sales would be needed to make up the cost of the poll and the media campaign.

Professional organizations partly funded by dues from local governments had a hand in the effort as well. The North Carolina Association of County Commissioners (NCACC), for example, hosted “public awareness training sessions” before and after the November election “to give some strategies on how to put these out to the public–in general terms, how to get the public to support it,” said Patrice Roesler, the organization’s deputy director.

Reports and presentations on the group’s Web site showed the workshops’ emphasis was clearly a how-to exercise on gaining passage of tax increases, though the NCACC president, David Young, said the organization doesn’t involve itself in the choices of individual counties, preferring to support more alternatives rather than one particular proposal.

Representatives from some “sixty to seventy counties,” including Orange, participated in the workshops, according to communications director Todd McGee. Speakers suggested counties use personal advocacy and recruit community organizations that would go to bat for taxes.

One participant, neighboring Chatham County, held five public information sessions to explain their tax proposal. Voters rejected it by a nearly 70 percent majority.

Search for Alternatives

Following the defeat of the Orange County transfer tax, county commissioners conjectured they might place the measure on the ballot for the November general election this year. However, following defeats in 19 of 19 counties–twice in one of them–the state’s General Assembly is considering a bill to remove the transfer tax option altogether.

Orange County’s own state representative, Bill Faison, a Democrat, has joined Republican leaders in co-sponsoring the bill.

Meanwhile, Orange County property taxes, already nearly the highest in the state, could climb 9.2 percent this year if the county manager’s budget is approved by the county commission in June.

Hal Young ([email protected]) is a contributing editor for Carolina Journal, a publication of the John Locke Foundation, Raleigh, North Carolina.