Funding for NC Cities Needs Debate

Editorial from Asheville Citizen-Times, April 24, 2013

There’s undoubtedly a measure of partisan power-grabbing in the Republican-dominated General Assembly’s campaign to limit the power of cities, given that the state’s major cities have Democrats at the helm.

But some of the effort to rein cities in may also be a natural reaction to their growth and impact on the state’s fortunes in the past few decades.

After taking Asheville’s airport and the WNC Agriculture Center last year, Republicans introduced bills to take away Asheville’s water system, Charlotte’s airport and Raleigh’s lease on the old Dorothea Dix property, which it wants to turn into a city park.

Other bills would end the franchise and business privilege license taxes, costing cities statewide millions in revenue, eliminate cities’ extraterritorial jurisdiction, which allows them to control growth on their borders, and limit their ability to require homebuilders to adhere to design standards.

These bills follow laws enacted last year that significantly restrict cities’ ability to grow through annexation.

The Raleigh News and Observer quoted Hendersonville Republican Sen. Tom Apodaca as saying he senses a feeling “that cities have too much power and want to control everything.”

Republicans are forcing a re-examination of the role cities play and the revenue sources that should be available to them to provide the essential services that support growth and economic development.

Given the climate in the legislature these days, Rep. Nathan Ramsey, R-Buncombe, is undoubtedly right when he says a bill to expand the options cities and counties have for raising revenue doesn’t have a “snowball’s chance in Raleigh” of passing, which he says is the reason he hasn’t proposed such legislation.

Ramsey says he has supported giving all cities and counties the options some cities and counties already have for bringing in revenue since he chaired the N.C. Association of County Commissioners Legislative Goals Committee more than half a decade ago.

According to the county commissioners association, four counties have had the option to impose a prepared-meals tax since the early 1990s. Seven counties have the option to impose a land transfer tax. Three have the ability to charge an impact fee to provide infrastructure related to growth.

Over the years the legislature has given counties the ability to enact a sales tax of up to 2 percent, which all 100 counties have done. Cities get a share of this revenue if counties enact the tax. Counties have the option to impose an additional quarter-cent tax if voters approve it, which Buncombe County did in 2011.

But property taxes are the only adjustable source of revenue under the control of cities and counties. That leaves counties and, to an even greater extent, cities with little flexibility to support services in a way that best fits their economic circumstances.

On Wednesday, Rep. Susi Hamilton, a Democrat who represents Brunswick and Hamilton, introduced a bill that would authorize municipalities to levy a half-cent sales tax.

That would give cities one option they don’t currently have, but services and utilities should be provided in a way that fairly distributes cost and oversight among those who benefit. Taxes such as impact fees, prepared-meal taxes, room taxes and land transfer taxes can be used to do that in a more equitable way in some circumstances.

That dynamic is best determined at the local level. Republicans, who have long opposed big government, should embrace the idea that such decisions are best made by elected officials who are directly accountable to those affected.

State lawmakers are understandably and wisely reluctant to be too free with taxing authority. In fairness the idea of giving cities and counties a menu of options for raising revenue has been around for a long time, and it didn’t get much traction when Democrats were in charge of the General Assembly either.

Still, it’s hard to comprehend why lawmakers would tie the hands of local elected officials but give taxing authority to an unelected board, which the Republican bill that would take Asheville’s water system would give a regional water and sewer authority.

With some justification, at least in the case of Asheville, Republican lawmakers have accused cities of being arrogant. But, arrogant or not, they are major drivers of the state’s economy, and it is folly to undermine them by starving them for revenue.

Out of fairness, Ramsey should introduce legislation to give all cities and counties in the state the revenue options some cities and counties already have.

As North Carolina’s cities have grown in the past few decades, their role has changed.

Maybe it is time to have a full debate about how to fairly finance the services they are called upon to provide.