Property tax rates continue to climb

Rising Medicaid, school expenses force hands of county boards of commissioners

• Tax Rate Survey: HTML (below) | Excel Spreadsheet

By Todd McGee
Director of Communications

For county budgets across North Carolina this spring, it was the same old sad refrain – spiraling Medicaid costs, exploding school needs and a rapidly growing population. As a result, a significant number of citizens will once again see increased property tax bills next year after 45 county boards of commissioners were forced to raise property taxes for 2005-06, including 19 counties that saw increases of more than 10 percent.

“North Carolina remains one of the fastest growing states in the nation, and that is driving up the cost of county government,” said NCACC Executive Director C. Ronald Aycock. “County governments in North Carolina are the only general purpose governments that serve the needs of all the state’s citizens.

“North Carolina’s policy of passing along 15 percent of the state’s Medicaid costs to counties, as well as recent decisions by the General Assembly to mandate smaller class sizes in the lower grades, are wreaking havoc on county budgets.”

By comparison, in 2004-05, 32 counties raised property taxes. In 2003-04, 35 counties raised property taxes.

Medicaid costs have increased by more than 65 percent over the past five years, and there appears to be no relief in sight to slow the growth. Fifteen counties spend more than 10 percent of their budget to subsidize the state Medicaid share, and 48 counties spend more on Medicaid than school construction.

North Carolina was one of only six states to see an increase in its elementary school population in 2003-04. Combined with the unfunded mandates by the General Assembly to reduce class sizes in lower grades, almost every county in the state is either building new schools or expanding existing schools.

Camden County was recently named one of the 10 fastest growing counties in the nation, according to the U.S. Census Bureau, and that growth has come with a price. The county, which borders Virginia in the northeast part of North Carolina, has been forced to build a new elementary school to accommodate the growth, and that caused commissioners to increase the property tax rate from 75 cents to 90 cents.

“We did it because that is the only way we could build this new school,” said County Manager Randell Woodruff. “The Local Government Commission had told us we could not take on any new debt. Every bit of the new revenue is being used to pay the annual debt service payment on the new elementary school.”

Woodruff said public outcry from the tax increase has been minimal, and credited that to steps taken by the board to begin managing the county’s growth. Commissioners adopted a moratorium on residential construction a year and a half ago, and the board recently acted to extend it by one year to allow the county to continue to build its infrastructure to handle the influx of new residents, most of who are coming from the Hampton Roads, Va., area, Woodruff said.

Medicaid continues to be a driving factor in many counties. The Randolph County Board of Commissioners increased its property tax rate by 2.5 cents, with 1.5 cents of that going to pay for the county’s increased Medicaid share. The other penny will be used to establish a special economic development fund to be used to attract industry to the county, according to County Manager Frank Willis.

Henderson County’s share of Medicaid has grown nearly 41 percent from 2000-01, and that played a large part in the county board upping its property tax rate by 4 cents to 51.5 cents.

“You take the Medicaid piece out of the budget and you’re not going to see that kind of growth,” board Chairman William Moyer told the Hendersonville Times-News.

Schools are the major capital need around the state, but many counties are also looking at building other needed facilities. Transylvania County commissioners voted to begin work on a $14.3 million jail and law enforcement center, which will be open in the next five to 10 years. Lenoir County added 1.5 cents to its property tax rate, in part to pay for a voter-approved $2.6 million library bond.

Many counties went through revaluation for 2005-06, and several coastal counties saw drastic increases in property values. Currituck County cut its property tax rate almost half, from 62 cents to 32 cents, after property values increased by an average of 146 percent. According to County Manager Don Scanlan, the actual revenue-neutral rate would have been 28 cents, but the county added 2 cents to raise $1.3 million for school construction needs and another 2 cents for a countywide fire tax, which replaced the district fire taxes that the county had previously charged.

A handful of counties managed to cut taxes for 2005-06. The Moore County Board of Commissioners reduced its tax rate by 2 cents by appropriating $1.6 million from its fund balance, while an increase in property tax base and revenues from the sales tax and land transfer tax enabled the Pasquotank County board to cut its tax rate by 2 cents.

Summary of Actions
Increases = 30
Revalue & Incr = 15
Revalue Revenue Neutral = 2
Revalue & Decr = 0
Decreases = 5
No change = 48
Interim = 0

*These counties revalue more frequently than every 8 years.