Special Taxing Districts in North Carolina. Kara A. Millonzi Associate Professor of Public Law and Government UNC Chapel Hill School of Government

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1 Special Taxing Districts in North Carolina Kara A. Millonzi Associate Professor of Public Law and Government UNC Chapel Hill School of Government

2 Can you legally commit a portion of property tax proceeds to specific expenditure items? Can you legally raise property tax revenue from only a subset of property taxpayers in your unit?

3 Can you legally commit certain property tax proceeds to specific expenditures?

4 Disaggregate general property tax levy Hold voter referendum on general property tax levy for particular purpose(s)

5 DISAGGREGATE GENERAL PROPERTY TAX RATE

6 Rate Description Amount County General $3, Libraries $ Parks Bond $ Fire $ Public Schools $ TOTAL $

7 Rate Description Amount.5210 County General $3, Libraries $ Parks Bond $ Fire $ Public Schools $ TOTAL $

8 Rate Description Amount Budget Expenditures.5210 Orange General $ $ Libraries $ $ Parks Bond $ $ Fire $ $ Public Schools $ $ TOTAL $ $

9 VOTER REFERENDUM ON TAX LEVY

10 I. No Tax Limit Counties Courts Debt service/deficits Elections Jails Schools Social services Municipalities Debt service/deficits Civil disorders II. $1.50 / $100 Valuation Limit Most, but not all, other authorized county or municipal functions (see G.S. 153A-149 or G.S. 160A-209 for list) III. Voter Referendums Does not count against $1.50 limit Raise maximum tax rate for Category II functions Add function to Category I (no tax limit) Authorize governing board to levy up to maximum rate (or up to maximum amount) for Category II function Authorize governing board to levy up to maximum rate (or up to maximum amount) for purpose not listed in Category I or II (but unit has to be otherwise authorized to undertake the purpose)

11 Rate Description Amount.5210 Orange General $ Libraries $ Parks Bond $ Fire $ Public Schools $ TOTAL $ Shall Carolina County be authorized to levy annually a property tax at a rate not in excess of.15 cents on the one hundred dollars ($100.00) value of property subject to taxation for the purpose of funding Library Services?

12 SPECIAL TAXING DISTRICTS

13 No class of property shall be taxed except by uniform rule, and every classification shall be made by general law uniformly applicable in every county, city and town, and other unit of local government. NC Const. Art. V, Sect. 2(2) [T]he General Assembly may enact general laws authorizing the governing body of any county, city, or town to define territorial areas and to levy taxes within those areas, in addition to those levied throughout the county, city, or town, in order to finance, provide, or maintain services, facilities, and functions in addition to or to a greater extent than those financed, provided, or maintained for the entire county, city, or town. NC Const. Art. V, Section 2(4)

14 1. County and municipal service districts 2. Rural Fire Protection Districts 3. Voted Supplemental School Taxes 4. County water and sewer districts G.S. 153A, Art. 16; G.S. 160A, Art. 23 G.S. 69, Art. 3A G.S. 115C, Art. 36 G.S. 162A, Art. 6

15 Think of a special district like a cult. It can take your money and you may not even be aware you re in one. --John Oliver, March 6, 2016

16 Municipal Service Districts (MSDs) Beach erosion control Downtown revitalization Urban-area revitalization Transit oriented development Drainage projects Sewage collection and disposal systems (including septic systems) Off-street parking facilities Watershed improvement projects County Service Districts (CSDs) Beach erosion control Fire protection Recreation Sewage collection and disposal systems (including septic systems) Solid waste collection and disposal systems Water supply and distribution systems Ambulance and rescue Watershed improvement projects Cemeteries

17 Board Findings Notice Public Hearing Board Adopts Resolution (county) or Ordinance (municipality) District Effective on July 1 Board sets district tax rate Services / Projects Within 1 Year

18 Board Findings Notice Public Hearing Board Adopts Resolution or Ordinance District Effective on July 1 Board sets district tax rate Services / Projects Within 1 Year 1. Determine Need to a demonstrably greater extent 2. Define Area 3. Make Plan

19 Counties Have a Little More to Do G.S. 153A-302 (a) Standards. In determining whether to establish a proposed service district, the board of commissioners shall consider all of the following: (1) The resident or seasonal population and population density of the proposed district. (2) The appraised value of property subject to taxation in the proposed district. (3) The present tax rates of the county and any cities or special districts in which the district or any portion thereof is located. (4) The ability of the proposed district to sustain the additional taxes necessary to provide the services planned for the district. (5) If it is proposed to furnish water, sewer, or solid waste collection services in the district, the probable net revenues of the projects to be financed and the extent to which the services will be self-supporting. (6) Any other matters that the commissioners believe to have a bearing on whether the district should be established. (a1) Findings. The board of commissioners may establish a service district if, upon the information and evidence it receives, the board finds that all of the following apply: (1) There is a demonstrable need for providing in the district one or more of the services listed in G.S. 153A-301. (2) It is impossible or impracticable to provide those services on a countywide basis. (3) It is economically feasible to provide the proposed services in the district without unreasonable or burdensome annual tax levies. (4) There is a demonstrable demand for the proposed services by persons residing in the district.

20 But, Municipalities May Have to Deal with Property Owner Petitions Petition to establish a district Petition to keep property parcel/tract out of district Petition to remove property from district

21 Board Findings Notice Public Hearing Board Adopts Resolution or Ordinance District Effective on July 1 Board sets district tax rate Services / Projects Within 1 Year Published once, at least 1 week before public hearing Mailed to each affected property owner, at least 4 weeks before public hearing

22 Board Findings Notice Public Hearing Board Adopts Resolution (county) or Ordinance (municipality) District Effective on July 1 Board sets district tax rate Services / Projects Within 1 Year Municipality Only: Must establish by ordinance, approved by majority vote at two successive board meetings

23 Board Finding s Notice Public Hearing Board Adopts Resolution District Effective on July 1 Board sets district tax rate (optional) Services / Projects Within 1 Year Must be set in annual budget ordinance Rate must apply to all taxable properties in district County Only: County board may restrict maximum rate to $0.15 / $100 valuation for fire and ambulance/rescue districts Municipality Only: Council must consider current needs, as well as the long-range plans and goals for the service district.city council shall set the tax rate so that there is no accumulation of excess funds beyond that necessary to meet current needs, fund long-range plans and goals, and maintain a reasonable fund balance.

24 Board Findings Notice Public Hearing Board Adopts Resolution District Effective on July 1 Board sets district tax rate Services / Projects Within 1 Year Municipality or county staff Contract(s) with other governments or private entities Municipality Only* Specify purposes for which $ will be used Require accounting of how $ spent Require accounting of any subcontractors * Counties should do this too!

25 Contracts in Downtown and Urban Area Districts Only Solicit input from residents and property owners Use bid process to select contracting party Hold public hearing Contract Detail specific projects/services in contract Limit contract to 5 years Require at least yearly accounting from private entity

26 Downtown District (aka Business Improvement District) Central downtown area Urban Area District 1. Central business district. 2. Concentrations of industrial, retail, wholesale, office 3. Major transportation corridor; or 4. Major concentration of public or institutional uses

27 Expanding Existing CSD Reducing Existing CSD Consolidation of Existing CSDs Changing Boundaries of CSDs Abolishing CSD Area contiguous and needs services or 100% petition Findings Notice Public hearing Effective July 1 For water and sewer districts only Property owner petition Council finds that no longer need to include parcel or tract No outstanding bonds Notice Public hearing Effective June 30 Automatic reduction when annexation of some properties in district Districts contiguous & same services/level of services Findings Notice Public hearing Effective July 1 If districts adjoining and created for same purpose Either property owner petition or at discretion of county board Findings Notice Public Hearing Effective July 1 Council finds that no longer need to provide additional services / projects in district No outstanding bonds or notes Notice Public hearing Effective June 30 Automatic abolition when annexation of all properties in district Counties Only

28 Expanding Existing MSD Reducing Existing MSD Consolidation of Existing MSDs Abolishing MSD Area contiguous and needs services or 100% petition Findings Notice Public hearing Effective July 1 Council finds that no longer need to include parcel or tract Notice Public hearing Effective June 30 Districts contiguous & same services/level of services Findings Notice Public hearing Effective July 1 Council finds that no longer need to provide additional services / projects in district Notice Public hearing Effective June 30 Municipalities Only