Sales Tax Distribution: Fayetteville citizens should watch closely
18 May 2017
As a citizen of Fayetteville, it is a frustrating and disappointing experience watching the negotiation process that intends to determine how future sales tax receipts will be divided among Cumberland County, Fayetteville, and other municipalities in the county. I suggest residents of Fayetteville get informed and thoughtfully watch this process. Closely investigating what is happening guarantees an eye-opening moment that will, hopefully, result in Fayetteville citizens speaking up and demanding fairness.
Given that annexations reduce the amount of sales tax distributed to the county and municipalities, a 2003 agreement was reached that called for Fayetteville and towns to reimburse the county, or one another, half the sales tax distribution gained because of annexations. The initial agreement was for ten years, but was extended in 2013 for three more years. It was extended again in 2016 for three additional years with the understanding that in January 2017, the county and municipalities would commence negotiations regarding division of sales tax receipts. Those negotiations started on 12 April 2017, in a meeting where the county and municipalities were represented.
The distribution can be done one of two ways. As is currently done, by Per Capita Distribution, where the total of the county-wide population (in incorporated and unincorporated areas) and the populations of each municipality are used to calculate a proportional per capita distribution. The other is Ad Valorem Distribution, where the sum of ad valorem (property) taxes levied by the county and each municipality, in the immediately preceding fiscal year, are used to calculate a proportional share of sales tax proceeds. The per capita distribution is used in our county.
The crux of the matter is that the county and municipalities, except for Fayetteville, are in agreement to extend the current arrangement until 2023. Mayor Nat Robertson has been quoted in several reports as saying the city was giving up $2.1 million when the agreement was first reached. The city is now losing $6.7 million. Among other places, this statement was reported in an article titled, “Cumberland County, Fayetteville and town leaders debate sale tax funds” by Steve DeVane. In the end, Fayetteville is facing pay-outs that have no limit. The question for all involved, especially for residents of Fayetteville, is whether this is fair to those who live in and financially support the city.
I live in Fayetteville and my answer is that the sales tax distribution arrangement in place, and being pushed for extension by the county and other municipalities, is horrendously unfair to residents of Fayetteville. What follows are some considerations that lead me to this conclusion.
As mentioned above, the annual amount paid is steadily increasing. Without doubt, these increasing payment amounts result from improved sales tax collections. Therein is a major point of unfairness. The bulk of sales tax receipts are generated in Fayetteville. Following is what I wrote during February 2016 in a column titled, “Cumberland County’s Sales Tax Distribution Squabble: An Example of What’s Wrong in America:”
Fayetteville’s Mayor, Nat Robertson, and City Manager, Ted Voorhees, led an information meeting on 13 January 2016 that was open to the public. One slide in the prepared presentation read: “Taxable sales within Fayetteville accounted for 82.6% of the county-wide total sales for FY2009 (the last year for which data is available). Under the state distribution methods, for FY2015 Fayetteville could only receive approximately 25% to 36% of the sales tax distributions.” It would appear reasonable that this be a point for consideration in determining fair distribution.
Given that the normal state distribution method yields a relatively low sales tax return for Fayetteville while a substantial portion of those taxes are generated in the city, it seems unfair that we suffer further under the modified distribution procedure. This unfair condition is compounded by allowing the amount transferred to the county and other municipalities to increase without limit.
The primary reason for increased sales tax revenue that is being distributed to the county and municipalities other than Fayetteville requires attention. I contend it is, by and far, due to actions undertaken by the City of Fayetteville. In 2004, Fayetteville annexed areas of Cumberland County that added some 43,000 residents to the City. The “Big Bang” annexation was a tense time in our city and county, but it took us above the 200 thousand population level that major businesses desire before considering locating in a city. After attaining that population level, national companies that I never expected to choose Fayetteville started arriving.
Further, the city has taken, and is taking, other actions that feed the economic growth of this area. Fayetteville took the lead in winning a Hope VI grant that allowed for demolition of public housing in the Old Wilmington Road area that did not provide the appearance that contributes to attracting businesses. More importantly, citizens were living in less than adequate housing. The result was beautiful units that provide better than adequate housing and enhances that portion of the city.
There is a promising effort underway to build a North Carolina Civil War History Center in Fayetteville. The city stepped up to financially support that project. It will be another asset that produces economic growth. The new transportation center located downtown is beautiful, functional, and rivals similar facilities anywhere.
The recently passed $35 million Parks and Recreation bond issue will bring much needed recreation facilities to the city. On the heels of this step came the decision to build a baseball stadium downtown. It will be home to Fayetteville’s own minor league team.
On Sunday (30 April 2017) after church, my wife and I sat in the shade on Hay Street and enjoyed jazz by three different groups. This was part of the annual Dogwood Festival attended this year by some 275,000 over the weekend. It could happen in a superbly accommodating space because the city built Festival Park and, over time, transformed the downtown from a “party central” to a beautiful area that is inviting and simply very pleasant place to spend time. As I sat there on Hay Street enjoying the afternoon, three thoughts hit me: I am starting to feel good, again, about Fayetteville; in the future, the Dogwood Festival will likely expand to the baseball stadium; all those festival vendors collect and deposit sales tax.
What has been presented – and more – shows Fayetteville to be, among the county and other municipalities, the economic engine of this area. To see this as fact, one only has to compare Fayetteville economic expansion actions with those of Cumberland County. What has the county done to spur economic growth? On Hope VI, county commissioners had to be pushed for a minimal investment; given the county’s track record, City Council made Fayetteville’s financial support of the North Carolina Civil War History Center contingent on the county matching that contribution. The bottom line question is: what of consequence is the County doing, or has done, to attract jobs, have people spend money in the area, and simply make this a great place to live? I think not much.
County leaders argue that they have mandated services that must be provided and sales tax revenue is needed to help meet those requirements. I drive by the county’s Health Department several times a week. What I see is a huge sign flashing all kinds of free stuff…”free mammograms, free condoms, free smoking cessation classes.” I suggest the county do a thorough review of what is mandated and challenge some mandates. They might also take actions that lessen or negate the need for those mandated services.
Fayetteville is transferring sales tax revenue, in increasing amounts, to other entities with no limit in place or in sight; generating the bulk of sales tax revenue and is definitely the economic engine of the county. I encourage citizens of Fayetteville to follow this sales tax distribution issue very closely and insist on fairness. This is not a matter that should be left for elected officials to resolve without thoughtful stand-taking by those of us out here feeding these government tills with hard-earned dollars. I hold that extending the current agreement is absolutely unfair to the citizens of Fayetteville.