Politicians across New Hanover County have been quick to criticize legislation moving through the North Carolina General Assembly that would change sales tax distribution in a way that would cut into tax revenues across the county.
But county officials are also eyeing another bill moving through the legislature that they say will further undercut the tax base. A proposal to exempt homebuilders from city and county property taxes is just another attempt by Raleigh to “whittle away” at local revenues, said county tax administrator Roger Kelley.
Local homebuilders counter that the bill would be a net gain for the county while also serving to act as an economic stimulus.
The bill from Rep. Mike Hager, R-Burke County, would exempt builders from property tax on home construction for up to three years, or until the house is sold. It passed with overwhelming support in both the House, with a 102-8 vote, and the Senate, at 38-5. The bill landed on Gov. Pat McCrory’s desk Aug. 14, and with veto-proof majorities it seems certain to become law whether or not it has support in the executive mansion.
New Hanover County budget makers are already facing the loss of potentially $6 million a year in sales tax money from a bill that proposes to change how urban and rural counties split the revenue. The exemption will be another blow.
“They’re just whittling away at our base,” Kelley said. “If they cut that piece of the pie out, the only way to make it up is to raise the rate on other taxes.”
Those increases would likely have to come from increased property taxes, Kelley said.
Under the current system, the county can assess a property tax on land and on any improvements to the land, including the value of the house. Even a partially completed house can be taxed for its value.
The homebuilders’ property tax exemption was first enacted in 2008 when the housing crisis was in full force. But the exemption expired automatically after three years and now builders are working to get it reenacted.
And for good reason, said Cameron Moore, executive officer of the Wilmington-Cape Fear Home Builders Association.
Both Kelley and Moore agree the bill will put more capital in the hands of builders. While Kelley said that money would come at the expense of county taxpayers, Moore contends it will be used to create purchasing power for home lots and construction.
“This in turn sets the stage for a true stimulus of the economy,” Moore said.
Citing statistics from the National Association of Home Builders, Moore said the bill would stimulate the construction of more than 500 new houses statewide, creating $31 million in new state and local taxes and 2,125 more jobs.
The stimulus doesn’t just come in the form of housing, Moore said. There’s a variety of other infrastructure that comes with it, from sewers and roads to lumber and appliances. The bill would serve to boost those industries, he said.
“For the Wilmington area and our region a continued economic recovery depends on the success of the construction sector, particularly housing as it is the engine that drives our economy and is a major job creator,” Moore said.
But Kelley worries how the loss of the taxes will affect the county’s budget. Since commissioners won’t want to cut services, the likely outcome would be higher property taxes.
“I hate giving the commissioners an abbreviated tax base,” Kelley said. “The citizens don’t want to lose our quality of life. It’s a great place to live. We don’t want taxed out of it.”
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