Commentaries
Tax Increases from UNC Bonds a Virtual Certainty," According to New Report

Proponents have downplayed possibility of tax increases

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July 22, 2000

Proponents of the $3.1 billion bond for construction at UNC-system schools and community colleges have downplayed the possibility that tax increases may be necessary to cover additional debt service incurred by the state. But a recent analysis by the John Locke Foundation's Pope Center for Higher Education Policy says otherwise.

"That the state might have to raise taxes is a matter of conjecture," said center Director and Policy Analyst George Leef. "But that some counties would have to raise taxes if the bond passes is virtually certain."

That is because Page 44 of the 50-page bill that approved the referendum contains a requirement that some localities match state funds for new community-college construction. Under the matching formula developed by a consulting firm and adopted by the state, counties that are below 40 percent of the matching formula won't have to put up any additional money. There are 38 such "low wealth" localities exempt from the requirement based on their "ability to pay" for new construction. ("Ability to pay" is determined by the arbitrary level of average income of people living in that county.). However, in those counties that are not exempt, property taxes may have to be increased in order to meet the matching requirement.

"We want our community colleges to be strong," said Lee County Commissioner Chad Adams, "But we need to tell people the truth that this bond package may increase property taxes."

In Lee County, for example, new construction at Central Carolina Community College's main campus, plus that at its School of Telecommunications, amounts to $8.4 million. Under the matching formula, Lee County would have to match each state dollar with 49 cents of its own. Thus, the county would need to pay approximately $2.2 million to get the $8.4 million from the state.

The problem with the matching formula, says Leef, is that statistical averages can and often do mask important realities.

"Wake County is well above the state average with regard to its ability to pay for construction," says Leef, "but one need not drive far from downtown Raleigh to see that some very poor people live in Wake County, people who would feel the bite of even a small property tax increase.

Discrimination by counties is particularly inappropriate in the case of community college that serve multiple-county areas, noted Leef.

"What is the logic in saying that the residents of Pasquotank County don't have to help pay for construction costs at College of the Albemarle, but that residents of Dare County do when both counties benefit from the college's resources?" Leef asked.

According to a study by the North Carolina Community College System, in 51 out of 144 community college building projects, counties would have to match state funds. The required local matching obligation totals over $53 million, ranging from as little as $17,000 in Ashe County to $9 million in Cumberland County. Of the 58 community colleges, only three Martin, Montgomery, and Roanoke-Chowan do not have any money slated for new construction.

"Government actions always have costs for people," said Leef. Sometimes those actions are clearly worth the cost. Sometimes not. At least let us be clear on this: if the bond passes, some counties will have to raise their taxes."

 


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