By Patrick Barnes and Mike Cross
In the mid-1980s, Dare County’s leaders saw a housing boom coming and didn’t know how to pay for it.
Higher property taxes were a touchy issue in the coastal county. The rich didn’t want them and the poor couldn’t afford them. Taxes on hotel rooms and other purchases wouldn’t raise enough.
Their solution? A tax on real estate sales.
With the legislature’s permission in 1985, Dare began levying a 1 percent tax on every real estate transaction. In two decades, the tax has raised more than $90 million. The money has helped pay for a gleaming high school with a view of the Wright Brothers memorial, two middle schools, three elementary schools and a $14 million justice center.
David Clawson, the Dare County finance director, said the land-transfer tax has been the key to the county’s financial health, allowing the county to pay for many of its construction projects with cash. David Watson has been selling real estate in Dare County since 1974 and was president of the local realtor’s association in 1981. “It never affected housing sales in our market,†he said. “People might complain about it, but I’ve never seen somebody not buy a house here because they will pay a 1 percent land-transfer fee.…†In 2005, the land-transfer tax brought in $15 million and in 2006, $12 million. “It’s the best tax we’ve ever had.â€
What is a land transfer tax?
This is a proposed 1 percent county tax that must be authorized by the General Assembly. The tax would apply to:
• All real estate sales
• Exchange of property (whether exchanged for money or other property)
• Deeds from nonprofit or religious organizations
• Certain leases or memorandums of leases longer than 10 years or that can be renewed beyond 10 years
• Timber deeds
How would the tax revenues be used?
The tax revenues are restricted to funding capital expenditures, such as water/sewer systems, solid waste disposal, schools, county-operated facilities and related equipment. It also can be used to retire county debt for any of these purposes.
At the present time, anyone building a house in Chatham County pays a $2,900 school impact fee. This fee is paid regardless of the price of the residence, whether the house is $50,000 or $7 million (and we do have one $7 million house in the Governor’s Club). With 1 percent the fee on the $50,000 house would be $500, making this more equitable to lower-priced homes. On the other hand, the fee on the $7 million house would be $70,000, but I doubt seriously that anyone being able to spend $7 million on a house would bat an eyelash at the $70,000.
For the year 2007, it is estimated the land-transfer fee would bring approximately $7 million into Chatham County, and by the year 2028 this would be up to $30 million (these figures are provided by the Chatham County finance officer and register of deeds). And, by the way, the property tax in Dare County is 25¢ versus our 59¢.
There are six counties on the coast that have this privilege. They all love it. At the present time, Moore, Orange and Durham counties would like to join Chatham in this revenue option. A large number of other counties in the state also would like to have this option.
The North Carolina Association of County Commissioners has asked the General Assembly for three things: remove the burden of Medicaid from the counties, improve schools, and give all counties the option of revenue sources. Somebody besides us thinks it’s a big deal.
Patrick Barnes and Mike Cross are Chatham County Commissioners representing Districts 1 and 2 respectively. This article is courtesy of Chatham County Line, www.chathamcountyline.org