Slow down on property tax legislation

Property owners have every right to be upset with the rapidly escalating taxes imposed on real property. And our legislature, always looking for ways to play to their constituents (especially in an election year) heard their complaints and vowed to do something to ameliorate property tax shocks. But as is so often the case, the legislature’s rapid response didn’t take the time to fully study the issue and find a workable solution.

To be fair city and county governments have themselves to blame for some of the backlash. At times, they have failed to exercise financial discipline and appear to have raised property taxes to match budget requests rather than properly discern wants from needs. And they certainly don’t seem to have been concerned enough about how their budget decisions will impact a large percentage of their residents - those who own real property. But we understand. When city and county elected officials face rapid population increases (or even declines) and simultaneously experience rapidly increasing expenses they must make decisions how to provide their residents services like utilities, school buildings, parks and other infrastructure, in addition to amenities that make their environs more amenable.

Let us remember that cities and counties are creations by and are agencies of the state of North Carolina. They do not have “home rule,” meaning they only have powers delegated them by the legislature. The legislature approves how many elected officials they are authorized, how they are to be elected and what sources and limitations local units of government can employ to raise money, including local sales and use taxes, occupancy taxes, utility franchise taxes, and property taxes, which amount to up to 40 percent of total local revenues.

We can all agree that something needs to be done in the face of the recent spikes in property taxes, but while the current shoot-from-the-hip legislation being considered by the General Assembly responds to property owners’ complaints it fails to consider the impact the property tax caps they propose might have on local governments.

Don’t dismiss the possible financial distress the legislation might cause, since property taxes amount to such a major revenue source for cities and counties and they have limited other options. They are required by the constitution to balance their budgets, so what happens when there isn’t enough money to equalize expenses and revenues? Will cities and counties lay off public safety officers, restrict services like garbage collection, public health and EMS, slash employees needed to issue permits and make inspections, close parks and playgrounds or just cut out any number of other amenities? When that inevitability happens, these local governments will throw up their hands and tell the state, “You created this mess, you fix it!”  

And the notion of a constitutional amendment limiting or capping increases of property taxes is nothing but a grandstand move. It will no doubt pass overwhelmingly, just as the foolish amendment lawmakers put on the ballot and citizens passed capping the income tax rate. A longstanding, but now forgotten tradition of NC legislatures is to never tie the hands of future General Assemblies; one can never predict what circumstances might present themselves in the future.  

Previous legislatures passed a law requiring local governments to conduct property reappraisals every eight years to reflect market values, hoping to cushion tax increase shocks. Some counties have begun conducting appraisals more frequently hoping to minimize those shocks. In the past tax rates have been adjusted downward to make the new appraisals revenue neutral but this is frequently not the case today.

We learned that property tax rates average in range from 0.66 percent to 0.77 percent of a property’s value in our state. But local officials often walk a tightrope of trying to appease property owners (who amount to about 64 to 66 percent of their residents) while also providing services the rest of their residents expect. Locally elected officials have responsibilities to all residents.

The question that begs answering is how to give local governments the flexibility to raise the revenues they need to provide services their residents need, while not making the tax burden so great on any one segment.

Senate President Pro Tem Phil Berger has wisely called for a moratorium on all property tax revaluation changes in 2026. That is an excellent proposal and gives leaders time to fully debate and decide how best to proceed. One essential requirement is that The North Carolina League of Municipalities and the NC County Commissioners Association be partners in any such discussions and decisions.

North Carolina has a proud legacy of being a fair tax state…not the lowest but certainly not the highest. Property taxes is an issue which demands fairness to all concerned

We must have a better solution than what we’ve seen from the legislature to date.

Tom Campbell is a Hall of Fame North Carolina broadcaster and columnist who has covered North Carolina public policy issues