Land transfer tax working well in six
North Carolina counties

Legislation to give all North Carolina counties authority to levy a land transfer tax is meeting resistance, but six counties have levied the tax for years, using the proceeds primarily for capital projects. This legislative session, efforts to extend land transfer authority to all 100 counties, a measure supported by the League and the N.C. Association of County Commissioners, is meeting opposition, especially from the N.C. Association of REALTORS ® (NCAR).

That association launched a campaign, complete with website, TV ads, direct mail and yard signs, against the land transfer tax. They label the tax as harmful to the economy, unreliable, a tax on home equity and regressive.

Since the 1980s, Camden, Chowan, Currituck, Dare, Pasquotank and Perquimans counties have had the authority to impose a land transfer tax — an excise tax on property conveyance. Washington County also has the authority from the General Assembly, but has not received approval by referendum for the tax.

According to the N.C. Association of County Commissioners, four of those six counties rank among the state’s 20 fastest-growing counties. Camden ranks second in increase in growth, and Currituck ranks third.

Currituck Manager Don Scanlon said that residents in his county have supported the land transfer tax as a way that growth can partially pay for itself. He added that local builders know that good infrastructure — water and sewer, schools — help market the land and create demand for property.

Describing how Currituck uses land transfer tax proceeds, Scanlon said: “In a word: Schools. Currituck County is recognized as the 17th fastest growing county in the country and like most other communities, this growth challenges our ability to provide public education. If not for the land transfer tax, we would fall further behind in our school capital needs and would have had to raise our property tax.

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“We have been able to build a middle school and renovate two elementary schools without incurring any debt thanks in large part by a good working relationship between our commissioners and the board of education, good planning and effective budgeting of the land transfer tax.”

Nags Head Commissioner Bob Oakes, a REALTOR, finds the tax a benefit to his community. “Dare County, and all its municipalities, has benefited tremendously from the 1 percent land transfer tax. I don’t think anyone could suggest that this tax has slowed growth and development in Dare.

Collecting the tax at closing makes it fairly easy to administer, and that’s the time when the money is on the table. Relatively wealthy counties like Dare and Currituck have had this tool to pay for infrastructure needs for many years, and it’s a shame that less fortunate counties across the state don’t have the opportunity to use this income stream to help pay for the costs of growth, and infrastructure repair and replacement. I hope the legislature can summon the courage to allow this tool to be used across North Carolina to meet pressing municipal and county needs.

Oakes wrote to N.C. Rep. Tim Spear about infrastructure funding: “I wanted to express my opinion on the need for a source of funding, both short and long term, for the repair and replacement of municipal infrastructure. Towns like Columbia and Creswell across the state have aging infra-structure systems. They need a short term source, like a bond issue, and a long term source for capital repairs, like a transfer tax.

“As a REALTOR, I know I’m swimming against the stream on the 1 percent land transfer tax. But I know the counties and towns need a funding stream for capital projects, and I’ve seen the good it has done in Dare County. I don’t understand why Tyrrell and Hyde shouldn’t have a similar source of funds. I like three conditions: a cap of 1 percent, a split between county and municipalities and its use for capital /infrastructure projects. I hope you’ll consider supporting a bond issue and a 1 percent transfer tax for capital needs.”

Chowan County Manager Cliff Copeland has not observed any negative effect of the tax on the real estate industry in that county. “Chowan County was the third county in the state to adopt the transfer tax. The monies are dedicated for capital outlay purposes. Transfers within the town of Edenton are divided 50 percent – 50 percent. I believe all the real estate agents in the county will confirm that the transfer tax has not impacted real estate sales in a negative manner, but in fact has facilitated sales through improved infrastructure, schools, etc.” The real estate industry realizes that we need the infrastructure because without it sales will decline.

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The tax is providing much needed revenues even during when the real estate market takes a downturn. Randy Keaton, Pasquotank County manager reported that county’s collection are down 32 percent this year because of the downturn in the housing market, but they still expect to receive as much as they did in 2004-05.

Said Keaton: “We are one of the fortunate counties that have had the land transfer tax. I will be glad to provide any information about the success of the tax in our county, if you need it. It has worked very well here and it has not hurt the real estate industry at all. All of the counties in the Northeast (N.C.) that have the land transfer tax are having problems with too much growth instead of the reverse.”

For Camden County, the tax provides about $550,000 in revenue annually.

“The land transfer tax has been a tremendous resource for Camden County. Currently the tax is generating about $5500,000 per year that the county uses for capital needs. This is a major revenue producer considering this county’s budget is less than $10 million. Even with a subdivision moratorium in place for 3–5 years, the amount collected increased. We are using a portion of it to cover debt service payments on land the county purchased. If it were not for the land transfer tax, Camden would be in a severely financially strapped position. We use these funds for all sorts of capital needs that otherwise we would not have the ability to provide.”

Schools, a critical part of the infrastructure have gotten a funding boost from the land transfer tax. Randy Darden, Perquimans County Manager said, “”We rely heavily on our land transfer funds for our school projects. Our county ranks 95th out of 100 in sales tax receipts, and part of those funds as you may know are earmarked for school capital funding. The land transfer tax makes up for that and also for adm funds that may be withheld from the counties. We are able to make necessary capital improvements that would otherwise have to come from increased property tax or financed over a period of time.

“We’ve averaged almost 30 percent annual growth the last four years. We are issuing about double the amount of dwelling permits now than we were just a few years ago. Due to our proximity to the Tidewater, Va., metropolitan area and the amount of waterfront property, we are seeing more residential development activity than Perquimans County has ever experienced.

“Land transfer revenues have been and will continue to be integral to our school capital improvements.”

April 2007 Southern City

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