Weird math

As a former English major, I have a hard time explaining the math behind how they carve up the proceeds of various taxes among Dare County and its six towns.

I have an even harder time understanding why they continue to do it that way.

So does Kill Devil Hills Mayor Ray Sturza. “It’s sad, it’s silly, it’s counter-productive,” he said last week.

Sturza’s evaluation came at the end of a session in which the Board of Commissioners and the town’s staff worked over the proposed budget to eliminate a 2-cent tax increase.

The reward for their frugality is the risk of building in an extra annual loss of well over $200,000, starting in the 2011-2012 budget year.

Here’s why: Local sales, occupancy and deed transfer taxes are generated in each of the towns and Dare County. A town’s share of the proceeds is based on how much it collects in property taxes. So collecting more property taxes means getting a bigger cut.

Kill Devil Hills Commissioner Jeff Finch explained it more directly: “They reward you for raising taxes and penalize you for not.”

Until this year, raising property tax rates was a rarity. The formula for dividing up the other taxes might have been a bone of contention but not a big problem.

This year, most of the towns are hurting. They are seeing hikes in costs they have no control over, like contributions to the state retirement fund. Plus, there is just not as much money coming in and they are counting every penny.

Three towns are looking at tax increases and three are not, which skews the distribution and creates a guessing game for all six.

Kill Devil Hills figures it could amount to $234,493 in red numbers starting in fiscal year 2011-2012.

Manteo first looked at holding steady on town taxes, then commissioners decided to consider an extra 2 cents per $100 of valuation just to protect its cut of the other revenues.

Southern Shores leads the pack with plans for a 4.25-cent tax increase. By one estimate, that could mean an annual windfall from the shared revenues of around $400,000. Which would mean that much less for the other towns.

Southern Shores has had a ridiculously low tax rate of 9.75 cents. But everything’s relative. The town has a lot more high-end houses than most of the rest of the county.

The rationale for the formula seems to be lost in the years since it was put in place. But Sturza suggested that after the towns mop up their latest budgets they should get together and push legislators to change it.

For the local option sales tax, they could consider persuading the county to use another option that the law already allows: distribute it per capita.

As for the other two taxes, if I was a legislator, which I don’t see happening anytime soon, I would propose something that seems logical: Give money back to the towns based on the percentage they generated.

Of course, I majored in English, not math.

If you have an idea, join the discussion