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NC local governments work to convince on sales tax shift

RALEIGH, N.C. (AP) — These are anxious times for local government officials and groups when it comes to the North Carolina General Assembly — especially when a projected tax windfall or shortfall depends on which city or county line one has crossed.

The Senate again has passed a bill containing a retooled formula for distributing annually more than $2.5 billion in sales taxes for counties and municipalities. Small, rural counties and the cities and towns inside them would benefit with more revenues. About 20 mostly urban or vacation destination counties likely would see revenues fall.

Divisions among local governments over the plan were highlighted before the House decides, probably this week, whether to accept or reject the idea within legislation that also expands economic recruitment incentives.

While several mayors and county commissioners walked the halls of the Legislative Building one day last week to oppose the formula change, several dozen elected officials with similar titles rallied in front of the building with Senate Republicans in hopes of pressuring House members and Gov. Pat McCrory to support it.

“We have small populations. We have limited resources,” said Laurinburg Mayor Thomas Parker, whose city and surrounding Scotland County are projected to see a 9 percent increase in tax collections next year under the formula change. Other low-income regions could see to 30 to 40 percent increases — money that could improve schools and infrastructure to attract new employers.

“We need all the help we can get,” Parker said after the rally.

At the back of the building, Pine Knoll Shores Mayor Ken Jones took a break from visiting House members with other Carteret County leaders. Their coastal communities would see an average 9 percent reduction in the tax receipts, according to a legislative bill analysis.

Jones said some counties to benefit from the reallocation already get more financial help from the state, such as for public schools.

“There’s a lot of inequities already, and why would we add on top of that pit the haves against the have nots?” Jones asked.

Currently 25 percent of these local sales taxes are distributed based on population, with the rest distributed to where transactions occurred. That tends to favor areas with regional malls and lots of discount retailers. Senate Majority Leader Harry Brown’s latest proposal would distribute half of the proceeds by population and half to the point of sale, like it was before 2007.

Kevin Leonard, executive director of the North Carolina Association of County Commissioners, has been in a difficult spot since Brown, R-Onslow, rolled out a more dramatic formula change in March.

The association is keeping neutral even as leaders of individual counties support and oppose it passionately. At the same time, Leonard said, the association continues to lobby for a “plan that will support and protect all 100 counties.” That could include restoring the counties’ original share of state lottery profits and giving counties more power to approve sales tax increases.

“There’s no doubt that this is a challenging issue for an organization that represents 100 counties that have significantly different views on the same subject matter,” Leonard said in an interview.

The North Carolina League of Municipalities has a similar juggling act. The League’s primary goal is “ensuring that all of our members’ concerns are heard and to try to help fashion a solution that helps all of our members,” spokesman Scott Mooneyham said.

McCrory threatened last month to veto a sales tax redistribution bill. Now senators have attached it to an incentives bill the governor wants.

Harnett County Commission Chairman Jim Burgin, who supports the formula change, said a lot is riding for all the counties on whether the adjustment becomes law.

“It’s an issue of economic fairness,” Burgin said.

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