Negative Equity

Paul Krugman writes in the New York Times today about "Negative Equity":

As home prices come back down to earth, many of these borrowers will find themselves with negative equity — owing more than their houses are worth. Negative equity, in turn, often leads to foreclosures and big losses for lenders.

In a follow-up blog post he writes:

I was strongly influenced by recent Boston Fed research, which finds a crucial role for negative equity in causing foreclosure:

Subprime lending played a role but that role was in creating a class of homeowners who were particularly sensitive to declining house price appreciation, rather than, as is commonly believed, by placing people in inherently problematic mortgages.

Rising annual expenses such as property taxes and user fees can trigger mortgage defaults which, in a rising market, can be resolved by sales or refinance. In a declining market foreclosures become more likely. Housing prices are quite sensitive to job growth and to basic quality of life factors like schools and infrastructure. When costs for infrastucture are not collected up front the pressure on the housing market is deferred, not eliminated. Need will manifest itself later either as increased taxation leading to defaults and/or reduced levels of service contributing to price depreciation and foreclosures.

North Carolina has been spared much of the nationwide housing problems. The market could well be described as soft as the population is still growing and houses are still being sold. Builders will still be constructing new homes but perhaps different homes as higher priced houses sit unsold. The big losers will be realtors as I predict less churn from existing homeowners who will stay put rather than risk their equity in upgrading in a softening market and the prospect of higher property taxes.

Update: Senate Votes To Help Strapped Homeowners. Legislation expands the role of the Federal Housing Administration in making federally insured loans more widely available. Like a scene from "It's A Wonderful Life" legislators have rallied to save the mortgage bankers and their customers just in time for the holidays.

"It is good before the Christmas season we have made a down payment on the solution to this problem," said Sen. Mel Martinez, R-Florida

The legislation will help the FHA "be a source of salvation for those families who were tricked into unaffordable loans," said Sen. Charles Schumer, D-New York

Viva Las Vegas: No Limits for Realtors

Wouldn't it be great if what happened in Vegas really did stay in Vegas? Realtors are in Las Vegas all week but I'm sure they'll be back for open house Sunday. In Vegas the house always wins but in house sales it's the realtor who always wins, no limits. I'll be here all week. I'll be waiting on those lobbying reports due today. Ka-ching, ka-ching!

Construction Inflation Higher Than CPI

Ever wonder about rising construction costs and why it's so absurd to expect spending on infrastructure to stay within the limits of consumer inflation (CPI) while keeping up with growth?

After years of minimal cost increases, prices of many construction materials skyrocketed from 2004 to mid-2006. Since mid-2006, some input prices have moderated, while others have fallen. But the cumulative increase in the producer price index (PPI) for construction inputs since December 2003 (28 percent through August 2007) remains more than double the 13 percent increase in the most common measure of overall inflation, the consumer price index (CPI) for all urban consumers. Labor costs, in contrast, have risen at similar rates for construction and for the private sector as a whole.

Cumulative Change in Consumer, Producer & Construction Prices

Source: Associated General Contractors of America, Data Digest.

The cumulative difference matters because the estimates for many projects now being bid, especially public facilities, were prepared in 2003-2005 under the assumption that construction costs would escalate at the same rate as the CPI. That divergence explains why some projects are being canceled, delayed or redesigned.

In the next several months, the PPI for construction inputs, which covers items used up in construction such as diesel fuel as well as materials that go into a project, is expected to accelerate to a 3-5 percent annual rate of increase from the recent 1.5- 3 percent range. By the end of 2008, and indefinitely thereafter, construction input costs are likely to be rising at 6-8 percent. Labor cost increases could top 5 percent by the end of 2007 and 5-6 percent in subsequent years.

For more information read the AGC Construction Inflation Alert

The bottom line: Owners, budget setters and contractors should expect larger materials and labor cost increases in 2008 than they have experienced in the past 12 months. Nonresidential construction activity is still likely to grow, as will demand for construction materials that are used in other industries and other countries.

Money Talking

This came in my email last night:

From: "**** ********" <*********@*****com>
To: gregflynn@******.com
Subject: ALL WET
Date: Wed, 7 Nov 2007 20:00

Greg,

Money don't vote.

It came from someone whose company received money from the NC Association of Realtors for both statewide and local Astroturf campaigns. I'd say that's money talking, even if he didn't sign it and, used his wife's email account.

Looking at the money that went into local Astroturf committees it appears that realtors and home builders spent about $6.50 for every vote against the transfer tax proposals. I'd say that's money talking.

In Chatham County voters declined the opportunity to lower impact fees by $1,000. In races across the state voters voted into office candidates who want to slow down rapid growth or raise impact fees for new development. People don't like rapid growth and they certainly don't like paying for it. That was people talking.

Home builders support sales tax increases to pay for the infrastructure associated with rapid growth. The campaign against the transfer tax demonized local governments and whipped up anti-tax sentiment so effectively that even sales tax proposals were defeated in counties where home builders supported them. With sales tax proposals in question it will fall to builders or property owners to pick up the tab.

I support responsible growth and reasonable ways to pay for it. I may be all wet but it's home builders and property tax payers who will get soaked, not realtors.

Update: The same person who wrote that "Money don't vote" also wrote this little ode to money, for political advantage:

They say money is the mother’s milk of politics. It’s true. Every two years the members of the General Assembly are up for re-election. The average cost of a North Carolina Senate race is now over $100,000---and climbing each year. Candidates and elected officials running must have money to win their campaigns, and they rely on those of us in the business community to help them out.

That’s where groups like ours can play a huge role---in the political process. Making a contribution to members of the general assembly does one thing---it buys access.

Money Talks

Looks like the transfer tax referendums failed in all 16 counties:
Brunswick , Chatham , Davie , Gates , Graham , Harnett County, Henderson , Hoke , Johnston County, Macon County, Moore , Pender , Rutherford , Swain , Union , Washington .

Sales tax referendums appear to have failed also.

Update: Sales tax failed in all counties where both a transfer tax and sales tax were on the ballot (Davie, Graham, Harnett, Johnston, Rutherford). Looks like realtors and home builders mobilized the anti-tax crowd too well and will have difficulty getting schools and infrastructure in place to support development. In counties where only sales tax referendum was being considered it appears to have passed in 6 counties (only Sampson, Catawba, Surry, Pitt and, Columbus confirmed as of writing).

Update: Home builders are going to be losers in this and they only have themselves to blame, especially in those counties with both transfer and sales tax measures on the ballot.

David Thompson, the executive director of the North Carolina Association of County Commissioners, said he expects voters will become more comfortable with the land-transfer tax in the coming years.

"There was a lot of well-funded publicity against the tax," Thompson said. "But it's still early. The growth is going to continue. The needs for schools and the needs for infrastructure improvements are going to continue to grow."

Transfer Tax Puppet Show

© John Cole. First published November 5th, 2007 at NC Policy Watch

NCACC on Growth and Tax

Chris Fitzsimon interviews Todd McGee of the NC Association of County Commissioners who talks about the problems of rapid growth and the tax strategies needed to deal with them at NC Policy Watch [Click to listen]

VOTE

Get ready for tomorrow if you haven't already voted.

Review your own voter registration status and the location of your polling site. To search for your registration, enter your last name ("Exactly Like") and first initial or first few letters of First name (change "Exactly Like" to "Begins With" button).

Preview the location of your Polling Place   |   Find your county Board of Elections

Johnston County Group Noncompliant

Donald Byrd, a Selma realtor, may be listed as the treasurer for the Johnston County Property Owners Against Transfer Taxes but he failed to sign the report submitted to the Johnston County Board of Elections as required by state election law. Perhaps it's because the report was actually prepared by the NC Association of Realtors.

William DePriest, the state Realtors' chief operating officer, said he is keeping the groups' books.

Astroturf Musings

A few of my thoughts from my Astroturf post over at BlueNC.com

According to Jason Schrader of the Asheville Citizen Times, Macon County voters have been getting robo-calls from Freedomworks, another group with connections to Art Pope.

Johnston County Commissioners have apparently said they will not impose the tax even if it is endorsed by referendum. Sort of like "If elected I will not serve". As I said earlier this tax is only as permanent as the next commissioner's meeting.
That 0.4% will indeed apply to everyone who has paid 6% to a realtor.

The 6% is a manifestation of a web of controls that seem legit when looked at individually but collectively have the effect of a monopoly. From kick-backs signing bonuses to requiring membership for MLS access to charging member firms for non-members, having newly licensed brokers dependent on member firms in "provisional status" and pressuring employees to make PAC contributions it's a well integrated machine.
Also I've begun thinking about patterns of sales and growth. If a new person comes to town and buys a new home, it's one sale for a builder and one sale for realtors. If a new person comes to town and buys an existing home from someone who buys a new home, it's one sale for a builder and two sales for realtors.
I guess that's an argument for impact fees. I just wonder if out of towners are steered to existing homes. I'd be interested to know the stats of first deed transfers.

As much as I hate the money NCAR is pouring into the transfer tax issue I'm loving the fact that they have been draining their pond and making enemies in state and local government. Next session will be a good opportunity for positive change.
Another issue I see is the real estate broker who is also a mortgage broker. Seems to be an area ripe for abuse that could use some oversight.

As much money as they have at their disposal, the realtors and homebuilders can't afford to fight this in 94 counties so they are going all out to suppress it as much as possible in the 16 voting next Tuesday.

Some of the [anti-tax] rhetoric goes round in logic circles. It's getting close to Tuesday. I noticed a steady trickle of early voters at county BOEs. Don't know what that means for candidates and issues but glad to see it.

Outside Influence

Charlotte Observer editorial this morning:
Transfer tax campaign: Will torrent of outside money obscure local interests?

In most counties, those state associations are providing the majority of the money for the anti-tax campaign, with local Realtor and homebuilding groups supplying the rest.
...transfer tax would hold down, if not prevent, increases in the property tax. Outside interests don't have to weigh those alternatives.
...if the transfer tax is defeated, don't expect them to be worrying about how local governments will fund local needs.

Astroturf Update 11/1

The Charlotte Observer has an article by Julia Oliver about this today:
N.C. groups finance local tax fights: Watchdog organizations say real estate interests trying to project grass-roots efforts

Total contributions to these Astroturf groups exceed $600,000 to date. (Editorial note, the chart for Harnett County should read $44,425.03 from state level NC Realtors and NC Homebuilders associations).

Union County Astroturf Report (via Charlotte Observer)

No local group has raised more money than the Union County Coalition Against the Transfer Tax. Of the $85,000 the group raised in the last month, about $50,000 came from the two state associations. The rest came from local realty companies and groups, including $20,000 from the Charlotte Regional Realtor Association.

Say Yes To Transfer Tax

It's not rocket science


Support Your County Transfer Tax

Astroturf Update

At the rate of spending revealed so far it appears that the NC Association of Realtors (NCAR) and the NC Home Builders Association have committed to spend at least $400,000 each in fake grassroots efforts to defeat the transfer tax in the 16 counties holding a referendum on the issue. Contributions from affiliated realtor groups could bring the total projected state budget close to $1,000,000 for local astroturf committees alone. This in addition to state level lobbying expenditures by NCAR of $938,787.

Johnston County Astroturf Report

According to documents filed 10/26/07 with the Johnston County Board of Elections for the Johnston County Property Owners Against Transfer Taxes, Donald Byrd, a director of the Johnston County Association of Realtors, is treasurer and funding in the amount of $74,386 comes from the NC Association of Realtors, Triangle MLS and, the NC Home Builders Association. Of this $69,532 has been spent with $4,854 cash on hand.

$25,000 Triangle MLS
$28,500 NC Home Builders Association
$14,500 NC Association of Realtors
   $999 NC Association of Realtors in-kind
 $5,387 Other sources (previous in-kind)
$74,386 Total

Harnett County Astroturf Report

According to documents filed 10/26/07 with the Harnett County Board of Elections for the Harnett County Citizen Against The Home Tax, Jan Morris, a Realtor in Coats, is treasurer and funding in the amount of $45,425 comes from the NC Association of Realtors, the Fayetteville Association of Realtors and, the NC Home Builders Association. Of this $42,938 has been spent with $2,488 cash on hand.

$1,000 Fayetteville Association of Realtors
$19,655 NC Home Builders Association
$18,700 NC Association of Realtors
   $999 NC Association of Realtors in-kind
 $5,071 Other sources (previous in-kind)
$45,425 Total

According to documents filed 10/18/07 with the Harnett County Board of Elections, Dallas Woodhouse registered the AFP-Harnett County referendum committee listing a contribution of $2,900 from Americans For Prosperity, Washington, DC.

This follows similar reports from Henderson County and from Chatham County:

The Henderson County Coalition to Protect Home Equity committee's funding of $42,233 comes from the NC Home Builders Association ($24,950) and the NC Association of Realtors ($17,283)

According to documents filed 10/17/07 with the Chatham County Board of Elections, Dallas Woodhouse registered the AFP-Chatham County referendum committee listing a contribution of $2,900 from Americans For Prosperity, Washington, DC.

Chatham County Getting Serious

It’s Time We Get Serious…about OUR TAXES…and OUR VOTES!
Guest Post by Mike Cross, Chatham County Commissioner:

It will soon be time for us to vote “For” or “Against” the 0.4% Land Transfer Tax and I want you to understand what we will be voting for or against, BEFORE you cast your vote! The National Planners Association has identified 10 Mega Regions in the US where massive growth is expected to occur. Of the10 Mega Regions, Chatham County will be part of the Number 1 high growth region (Triangle, Triad into Charlotte-Mecklenburg ). The NCDOT has already designated US64 as a future “Super Connect” between Raleigh and Charlotte. The Association of County Commissioners and the Triangle J-Council of Governments (Orange, Wake, Johnston, Lee, Moore and Chatham) agree that massive growth is coming.

Wake, Durham, Orange, Johnston, Harnett, Lee and Moore are growing “gang busters”. Maybe there’s something to these projections! Whether this turns out to be true or how long it will take to occur are questions I can’t answer. We certainly do have all indications that growth is coming to Chatham with approximately 15,000 homes approved for construction and more proposals coming every week.. With growth, comes requirements for schools, services, other public facilities and the infrastructure to support these requirements.

Based on a .4 students average per household, we may be looking at up to 6 thousand new students over the next 10-12 years. That equates to 6 to 8 new schools; approximately 1 new school every 2 years, plus an average of $1Million in operating cost, per year, per school!

Many have been very outspoken about growth “pays for itself”. Well, it doesn’t pay upfront and it certainly doesn’t appear to have paid it’s way in Wake, Raleigh or Cary, at all – roof tops, commercial, retail, hi and low tech industry - what else does it take to make it “pay for itself”? Last November,’06, Wake County voters approved $1.056 BILLION for Capital Improvements with $970 MILLION going to school construction. This month, October, they approved $276 MILLION in additional Bonds. All this debt will go on their property taxes…increases! Is this the example of how “growth pays for itself”? This is Halloween “Scary” to me!

With an average cost of $375,000 on new homes, these new homes are obviously not being built for current Chatham residents. Our new citizens are going to expect their schools and services to be in place when they arrive. Waiting until their first property tax payments come in to start planning and construction, simply isn’t going to work. Maybe a little up-front revenue generated by our newcomers would be appropriate.

No one wants higher Property Taxes or higher School Impact Fees! In fact, I don’t know anyone who wants higher taxes, period and no tax appears completely fair to everyone. But the requirements of growth have to be paid for and here is the opportunity for us to decide just how we prefer to pay for at least some of it.

There will have to be significant tax increases in our future, so we are really voting on which tax we prefer to start with. Our BOC is requesting your support with the 0.4% Land Transfer Tax , because we believe this is the most fair option. It’s based on sales price, whereas SIF is a flat fee regardless of sales price or square footage. Seems more fair to me. Without the LTT, we will have to, once again , go to Property Taxes, School Impact Fees and/or take another look at imposing Adequate Public Facility Fees.

The 0.4% LTT is not a “Do All/Fix All” tax, but it would allow us another option to pay Debt Service on at least one new school. It takes $1 Million/year for debt service for every $10 Million borrowed and schools are very expensive: Elementary,$18-$22 Million - Middle, $24-$28 Million – High School $38-$43 Million!

The 0.4% LTT would be negotiated in the transfer/sale/purchase of property. It does not apply to wills or gifts and it does not arrive in the mail every year. For most of us, that means we don’t need to be concerned, unless we decide to sell or buy. It’s a relatively small tax, only1/15th as much as the normal Realtor’s Fee.

You have no doubt read or heard some of the following quotes from those who oppose LTT:

• “Growth has and will pay for itself”…and the LTT “will only encourage wasteful and inefficient spending.” Growth hasn’t paid for itself here and the Chatham County budget process is used by the UNC School of Government as the example of how the budget process should work…wasteful, inefficient, I don’t think so!
• “Pending Home Sales Fall to Record Low”, “New Home Sales at Seven Year Low”,
  Foreclosure Rates Hit Record High”, “Mortgage Mess is Big, Murky”. Not in Chatham!
  I believe the “whatever it takes attitude” of some folks in this industry ; i.e. “creative financing” arrangements and “qualifying” unqualified buyers (those citizens whom they know can’t afford what they are selling) is largely responsible for these problems and they must know these deals are risky…and yes, they do reap their profits and only the mislead buyer and his or her families are devastated.

“Who’s paying for the Anti- LTT effort?” The North Carolina Realtors Association is the primary contributor. They have blocked all LTT efforts since 1990 – millions in political contributions, TV/Radio ads, Mailers, Telephone Call Banks, Emails and Paid Lobbyist to put the heat on us and our Legislators. Why do they do this? 6 NC Counties and 38 of our 50 States have LTT. It has proven to be beneficial to this industry and the citizen communities where it is applied. Schools, Services, Public Facilities and Infrastructure help to “SELL” their products! Thankfully, many of our Chatham Developers, Builders and Realtor realize these benefits and actually support our LTT Referendum.

“Politicians Should Listen to the Voters”. I certainly agree!…and apparently, so do the majority of our NC Legislators. Perhaps now would be a good time for Voters to listen to their elected officials; the citizens to whom they have bestowed their “Public Trust”.

I have now served on 2, very different, Boards of Commissioners and 8 consecutive County Commissioners have agreed on our Capital Improvements Plan and all agreed to seek LTT to help pay the bills.

Most of us are really tired of higher property taxes. Many simply cannot afford more. For some, it’s already a matter of food, medicine or heat for the winter. And remember, if I vote to raise Your property taxes, I would also be voting to raise My property taxes and I really don’t care to do that! LTT would soften that action.

Property values in Chatham have increased tremendously and large profits are being enjoyed. Those who are profiting – Investors, Developers, Builders, Mortgage Bankers, Attorneys, Sellers and Realtors shouldn’t expect the current/average Chatham citizen to foot all of the bills for the new schools, services, facilities and infrastructure required to support and sell their future products.

Without massive and rapid growth, we probably don’t need anything! But since it is quite apparent that this influx of growth is coming, whether you or I like it or not, help your BOC pay the bills.

Please VOTE “FOR” the 0.4% Land Transfer Tax.

I thank you for your support,

Mike

Editor's note: this is a personal opinion article

Bonus Round

The North Carolina real estate industry has a little secret that may get a little sunshine, or not. According to the Carrboro Citizen 10/11/07 real estate brokers are not required to notify buyers in writing about bonuses paid to the broker by a seller in addition to sales commission.

The North Carolina Real Estate Commission voted last week to convene a task force to determine whether homebuyers in North Carolina are being made sufficiently aware when the real estate agent showing them a home is being offered a bonus by the seller. As the regulations now stand, agents must tell buyers of such financial incentives but are not required to notify them in writing. Many sellers, particularly homebuilders, pay a bonus to agents in addition to the sales commission.

However the task force will be comprised of "representatives from throughout the industry" so don't hold your breath for full disclosure. An earlier Charlotte Observer story (via N&O 10/11/07) notes that:

The panel was responding to an Observer investigation of Realty Place, which received millions of dollars in bonuses from home builders in exchange for finding buyers for their homes.
:::::
In more than 50 interviews with Realty Place customers, the Observer found no one who was aware of the bonuses.

The original Charlotte Observer Investigation 9/30/2007 shows:

Realty Place worked closely with the builders it had vowed to beat up. The company funneled buyers into low-priced starter-home developments, many of which are now plagued by foreclosures.

Realty Place's marketing, sometimes subsidized by builders, regularly and dramatically understated the cost of buying a home.

What kind of bonuses are we talking about in the Charlotte area? The sidebar of the Charlotte Observer Investigation goes into detail on real estate bonuses and practices in Charlotte which "are offered on about 40 percent of newly built homes and about one-fourth of existing homes". The following slideshow of images from the current Charlotte realtors' publication will give you an idea of some broker incentives beyond standard commission splits:

Next time a realtor complains about a commission, commission split or, a transfer tax, don't forget to ask about the "bonus" (or property tax).

Henderson County Astroturf Coalition

We told you about the multitude of realtor funded fake grassroots groups in Astroturf Rising. Now BlueRidgeNow.com has an article about the Henderson County Astroturf Coalition funded by NC Realtors and NC Home Builders.

Anti-tax mailings spur questions

Judd Richardson, Hendersonville Board of Realtors president, said the Henderson County Coalition to Protect Home Equity includes Hendersonville Board of Realtors, Hendersonville Home Builders Association, North Carolina Home Builders Association, North Carolina Association of Realtors and citizens.
:::::

The treasurer is Paul Taylor, president of the Hendersonville Home Builders Association. The group received a check for $24,950 from the North Carolina Home Builders Association and a $17,283 in-kind contribution from the North Carolina Association of Realtors.

The group had $24,950 cash on hand and had expended $17,283 of in-kind contributions, the report says.

Local leaders aren't buying the hype.

County Commission Chairman Bill Moyer said he also has seen the mailings.

"It is disappointing they would do this," Moyer said. "They think they are protecting their own self-interest."

Moyer said it is misleading that the coalition would try to present itself as a grassroots organization when outside money is funding the campaign.

"I think they are making it appear like it is a broad-based citizens group," he said, adding, "This is not a local effort to oppose it."

Some Real Estate Brokers Support Transfer Tax

From a Winston-Salem Journal article:

Connie Kowalske, a real-estate agent for Howard Realty and the treasurer of the Davie County Coalition Against a New Home Tax. “We’re the only (sic) organized group that can speak for homeowners. As Realtors, we have pledged to protect private property rights.”

But not all real-estate agents are against the tax. Neal Foster, the owner of the real-estate firm Neal Foster & Associates Inc., said that Davie doesn’t have enough commercial growth to support the needs of the community. He is also a member of the group Davie Alliance, which formed this year to work on local issues.

“The land-transfer tax and the sales-tax are an alternative to take the burden off the landowners and property owners,” he said.

Running On Empty

When your gas tank hits empty it usually means you have about 8% of your tank capacity left, enough to get you to a gas station allowing for a few diversions. If you kept your tank at "empty" all the time you couldn't get very far without totally running out of fuel and couldn't take care of much business. It would be imprudent. Even cash strapped drivers put an extra $5 or $10 worth of gas in the tank to make sure there's a cushion to get to work, take care of the kids and, run errands.

The John Locke Foundation wants North Carolina counties to run on empty. In a series of cookie-cutter bogus reports the most egregious example of fiscal irresponsibility is the assertion by Roy Cordato that North Carolina counties should cut their fund balance to a dangerous low of 8% and absurdly misquotes the NC Treasurer to support this position. He argues that amounts over 8% are spare dollars that should be spent or given away.

The State Treasurer’s policy manual states that county undesignated-fund balances should not drop below 8 percent of total expenditures.
:::::
...above the 8 percent strongly recommended by the Treasurer [is] cash that is currently available to help with existing needs or to provide much needed tax cuts or both.

The Treasurer does not recommend reducing cash reserves to the 8% danger level. This assertion is based on selective reading of the Treasurer's recommendations:

The majority of property tax revenues are received in the latter months of the calendar year. Therefore, there should be reserves on hand in the form of fund balance available for appropriation at June 30th to prevent the unit from experiencing cash flow difficulties during the first two quarters of the next fiscal year. The minimum level of fund balance available for appropriation that should be on hand to enable the unit to meet current obligations and to prevent the unit from experiencing cash flow difficulties is 8% of the prior year's expenditures.

But wait, there's more. The Treasurer recommends additional reserves for unforseen needs or opportunities beyond the "minimum" 8%.

In addition to the 8% needed to prevent cash flow difficulties, units also maintain fund balance available for appropriation in the General Fund in case unforeseen needs or opportunities should arise. Fund balance available for appropriation at June 30th is a source that may be budgeted in the following year to address these situations. There is not an established minimum amount that should be in reserve for these purposes. The officials of the individual units should make that determination. The amount of fund balance available for appropriation maintained by a particular unit would be influenced by such factors as the size of the unit, economic conditions within the unit, future capital outlay needs, stability of revenue sources and susceptibility of the unit to natural disasters.

The total recommended reserve is not an absolute number but is one based on the size and unique needs of each county. For the state as a whole that average number is 20.73% and the average ranges from 18.09% - 28.56% depending on the size of the county.

The staff sends letters to units if the amount of fund balance available for appropriation as a percentage of prior year expenditures in the General Fund falls below 8%. The staff also compares the percentage of fund balance available for appropriation to the prior year percentages for similar units. If that percentage is materially below the average of similar units, the staff will send a letter to alert the unit of this fact. Units will be encouraged to evaluate the amounts in reserves and determine if the level is adequate.

A county that runs a fund balance of 8% is living on the edge, has limited ability to respond to unforseen events, has seriously impaired bonding capacity and limited ability to make improvements in county infrastructure at the beginning of a fiscal year before revenues have accumulated.

The chart below shows the average percentage of fund balance available for appropriation for similarly grouped counties for the fiscal year ended June 30, 2006. Officials should use these figures to compare their unit to similar units and evaluate the adequacy of their unit's current reserves.

The misrepresentation by the John Locke Foundation of what the Treasurer recommends as fiscally prudent is inexcusable. They will say anything for political gain. This "talking point" has been in the works for several months. The Realtors Association and representatives have been using it to claim that counties are flush with cash. The JLF's Donna Martinez dropped it on Chatham County Commissioner Mike Cross on a TV show a while back (to little effect).

Chatham County Laboratory

Chatham County has been a political laboratory for developers and realtors in recent years, as documented by Jennifer Strom in The Independent:

It started in 2002
How Bunkey Won: A Chatham County group tapped into Triangle-wide developers' coalition
Fast forward to 2006:
High noon in Chatham: County on edge as the primary election nears
These are legitimate groups:
The Chatham Coalition
Chatham Citizens for Effective Communities
Pittsboro Together
This is the official Chatham County information site:
Chatham Land Transfer Tax Referendum

The name "Chatham County Coalition for Homeownership" is deliberately chosen to sow confusion with the legit "Chatham Coalition". All counties should expect robo-calls and a last minute surge of disinformation, much of it sourced from Civitas and John Locke Foundation.

Rob Schofield had a good review of the disinformation being circulated about this complex issue:
One Size Does Not Fit All
Yesterday Chris Fitzsimon had an article summarizing the realtors involvement:
The Realtors’ misleading rhetoric continues

Having just flown over Chatham County this week it was dismaying to observe the pock-marked landscape with large swaths of cleared red dirt each relieved only by a handful of specks representing the first buildings of subdivisions and all within sight of the dried shores of Lake Jordan.

Astroturf Rising

Faced with a drought of public support for its high profile opposition to the transfer tax the NC Association of Realtors (NCAR) has replaced the withered remains of the "Stop The NC Home Tax" website. With newly installed Astroturf at the same address called "Vote No on the Home Tax" hoping to fool county voters into thinking it is a real grassroots movement the website has scrubbed all references to NCAR. In its place is a roster of newly formed "Local Committees" to provide cover for the real involvement of the realtors' group.

Swain County Property Owners Against the Transfer Tax
Macon County Citizens Against the Transfer Tax
Graham County Citizens Against the Transfer Tax
Rutherford County Property Owners Against the Transfer Tax
Henderson County Coalition to Protect Home Equity
Union County Coalition Against the Home Tax
Davie County Coalition Against a New Home Tax
Chatham County Coalition for Homeownership
Moore County Coalition For Good Government
Hoke County Citizens to Protect Homeownership
Harnett County Citizens Against the Home Tax
Johnston County Property Owners Against Transfer Taxes
Pender County Coalition to Protect the American Dream
Committee of Concerned Brunswick County Property Owners
Washington County Landowners Against the Transfer Tax
Gates County Citizens Against Higher Taxes

Voters in Chatham County have been scratching their heads over robo-calls from a hereto unknown group called Chatham County Coalition for Homeownership. Meanwhile Brunswick County voters are slowly finding out that the Committee of Concerned Brunswick County Property Owners is an organization of realtors, homebuilders and, mortgage brokers headed by Steve Candler, governmental affairs director for the Brunswick County Association of Realtors.

I miss Angie already. Don't get burned skidding on the Astroturf.

Fallonious Assault

The NC Realtors recent lobbying report showed expenditures of $43,740 going to Fallon Research & Communications of Columbus, Ohio, for Voter Opinion Survey services. That company name popped up late September when selective results from a phone survey conducted among Raleigh and Cary voters July 22-24 by Fallon Research & Communications were released. At the time the results were released, Public Policy Polling was not familiar with the organization, though referenced the following article from The Texas Observer, an independent investigative publication. The fast growing town of Frisco, Texas was considering ordinances to control shoddy building practices two years ago.

To drive home this alarming message, the opposition quickly cobbled together an Astroturf political action committee named Citizens United for Frisco’s Future or CUFF.
:::::
CUFF has also spent $3,500 with Ohio-based Fallon Research and Communications, a Republican polling firm with ties to the housing industry, and $13,000 with Cornerstone RSCS for the production of the aforementioned TV ad. Both these companies have been hired by builder-financed PACs in recent years to help defeat citizen initiatives around the country.

From a 5/27/2004 article, an auto-bio of owner Paul Fallon:

Paul Fallon is a public opinion researcher, political pollster and advisor for corporations, trade groups, levy committees, interest groups, political candidates and public organizations. He has worked on numerous projects, campaigns and ballot issues throughout the country. He also conducts customer, member, contributor and citizen satisfaction studies for government agencies, industry and labor groups, public agencies and private companies. He recently completed a 3-year stint as the director of public opinion research for the National Association of Home Builders. Paul was responsible for opinion research, as well as political polling for a highly successful ballot issue management program that resulted in numerous successes in campaigns at the state, county and local level. During that time he earned a reputation for helping candidates navigate complex growth issues affecting their campaigns. He previously served as director of public opinion research for the Ohio Republican Party.

The Frisco measures were subsequently defeated:

Perhaps it’s because the homebuilding industry, the state’s leading real estate association, the local chamber of commerce, and the city government teamed up to spend at least $100,000 in a smear campaign. Efforts to defeat the proposals and vilify their main champions, the Becka family, included television and newspaper ads, signage posted all over the city, and borderline propaganda on the city’s website. “The vote demonstrates how easy it is to sway an election if you have enough money,” wrote Dr. David Becka

$938,787

$938,787.07 - is the latest total for spending by the NC Association of Realtors trying to defeat local revenue options for local governments. In a lobbying report dated 10/11/07, filed at the Secretary of State's Office, the NC Realtors reported Solicitation of Others spending of $45,800.21 in the month of September, of which $43,740 went to Fallon Research & Communications of Columbus, Ohio, for Voter Opinion Surveys.

Realtors Endorse Baldwin

Greetings Buncombe County visitors. Thanks to Chasing the Bread Truck I can see that you all are having problems similar to Wake County in terms of realtors influencing local politics. In a recent email circulated to members in Wake County the Raleigh Regional Association of Realtors (RRAR) played its hand and finally endorsed Mary Ann Baldwin and others, as expected, for Raleigh City Council seats.

In September RRAR formally endorsed the following Raleigh City Council candidates widely considered to be development friendly:  Tommy Craven, District A, incumbent, Jesse Taliaferro, District B, incumbent and Mary Ann Balwin, candidate for one of two At-Large seats. Also endorsed were unopposed incumbents James West, Phillip Isley and the current Mayor Charles Meeker.

The board also voted to endorse Nels Roseland, John Rigsbee and Tommy Byrd for Cary Town Council and the current Mayor Ernie McAlister. Sean O'Brien and Ron Margiotta were endorsed for Wake County School Board.  RRAR also endorsed Rob Bridges and David Camacho for Wake Forest Commissioner, Charlie Adcock for Commissioner in Fuquay Varina, Peter Atwell and Laurie Clowers for Councilors for Town of Holly Springs, Bryan Gossage for Town Council in Apex and Liz Johnson for Commissioner in Morrisville.

Update: A few snippets from the RRAR email:

This election is expected to have a very low voter turnout (11-13%), and REALTORS getting out to vote could make the difference for our candidates.
  :::::
"Strong municipal leadership from our elected officials will be a critical part of our future success," said Association President Phyllis York Brookshire.
  :::::
We'd like to thank everyone who contributed to RPAC this year. We are still trying to raise those last few thousand dollars to get us to $100,000; to date we have raised $94,000. These funds come back to us to help us support candidates in Wake County

Polk Moves Vote to May

According to the Tryon Daily Bulletin Polk County Commissioner have postponed their Transfer Tax referendum from November to May 2008. Commissioners have been split on how to spend the estimated $1 million in revenue if enacted and voter turn-out would be low relative to the May primary.

Elswhere, despite misleading headlines, a poll shows support for Transfer Tax when used for schools. Also, despite their best attempts at spin, a Triangle Community Coalition poll shows solid public support for controls on growth.

Update:

Heather reminds us above that antonymously named realtor/builder organizations are not restricted to the Triangle. The Mountain Council for Accountable Development is actually a group of realtors and Asheville homebuilders.

Polk County is considering an 80/20 split of Transfer Tax revenues with 20% to be used for matching grant programs to purchase open space to protect water sources and preserve Polk's rural allure.

My Big Fat Greed Wedding

Forgive me for indulging in more Raleigh City politics but Mary-Ann is at large again. Monday night she danced around the issue of developer contributions:

Baldwin - explained contributions from a broad base of support. Made comparisons of “development” backed funding to other candidates.

Tonight at a City Council candidate forum sponsored by the League of Women Voters and WakeUP Wake County her two-step was more rehearsed. She said that she had accepted donations from "members of the development community" but that they needed to be looked at "proportionately" with respect to other contributions.

So she's getting mucho dinero from the real estate community. But don't worry. She's getting so much more money from other people that realtors and developers will have to wait in line behind the other money. That's reassuring. Once that water hits the Ouzo it turns cloudy. It doesn't matter which faucet or bottle it comes from. And yes, that is money pinned to those jackets.

She is running on a platform that includes communications (hasn't she heard about open meeting laws), community values (whatever that is, insert your value here) and balanced growth. Balanced growth? That's the mantra of the Triangle Community Coalition (formerly known as the Wake County Real Estate and Building Coalition) who gave her a thumbs up in the Triangle Community Coalition Political Pig Pickin’ 2007 Straw Poll. Baldwin claimed tonight she had no endorsements from the development community but it sure looks like she's gotten the nod from them. You may recall the Director of the TCC gets a $5,000 monthly retainer from the NC Association of Realtors through his company Public Solutions, as does Baldwin's political choreographer, Campaign Connections.

Top Shelf Spending

$892,987.07 - is the latest total for spending by the NC Association of Realtors in the quixotic attempt to defeat local revenue options for local governments. In a lobbying report received today, at the Secretary of State's Office, the NC Realtors reported spending $74,213.26 in the month of August. In addition to the usual retainers to Campaign Connections and Public Solutions about 25% of the spending was for newspaper ads, another 25% for radio/TV spots while a combined $10,095 was spent on polling and phone-calls.

The NC Realtors are so concerned about the North Carolina economy they decided to go to South Carolina for their annual convention in Myrtle Beach. They'll be there for the next few days so don't worry if they're not picking up the phone fast enough. They have to down the margaritas first.

Angie: The Other White Lie

NC Realtors' spokesperson "Angie" is not quite the red pickup driving happy homemaker she seems. She has been seen driving her Mercedes Benz around Raleigh and now we can tell you who she really is. In many ways the story of the real "Angie" is more compelling than the "average homeowner" fabricated by the NC Realtors. Her real name is indeed "Angie". For 17 years Angela Crone promoted pork for the North Carolina Pork Council until last fall, when she left to work in a physician's office.

When Angie began this campaign she was a homeowner but far from an average homeowner. Her name was on the deed of a west Raleigh home with a market value of about $500,000, about twice the median sales price of NC homes. On this particular street homes are listed on the MLS for about twice the current tax value, often as "tear-downs" and new infill homes sell in the order of $1,000,000. By the time the legislative session had ended (with a transfer tax option in the State Budget) Angie was no longer a homeowner and hardly happy. She had a modest rental apartment near Raleigh's Five Points having signed over her share of the deed to the husband from whom she separated.

Since Angie's personal story falls into the "been there, done that" department I don't take issue with it and, wish her well. I do take issue with the NC Association of Realtors' depiction of her and the representation of a persona that does not exist in the real world with fake documentary interviews and maudlin tales.

17 NC Counties Consider Transfer Tax

According to Gerry Cohen at Drafting Musings 17 North Carolina counties are planning referendums that include a Transfer Tax. 12 counties are holding a referendum on the Transfer Tax option only. 5 counties are holding a referendum that includes both the Transfer Tax and the Sales Tax options. In addition, 11 counties will be holding a Sales Tax referendum and Mecklenburg County will have a Transit Sales Tax referendum.

Transfer Tax Referendums:
BRUNSWICK | CHATHAM | GATES | HENDERSON | HOKE | MACON
MOORE | PENDER | POLK | SWAIN | UNION | WASHINGTON

Transfer & Sales Tax Referendums:
DAVIE | GRAHAM | HARNETT | JOHNSTON | RUTHERFORD

Sales Tax Referendums
CATAWBA | COLUMBUS | CUMBERLAND | GREENE | HERTFORD
LENOIR | MARTIN | PITT | ROBESON | SAMPSON | SURRY

Mary-Ann Builder

Mary-Ann Baldwin, a marketing professional auditioning for Raleigh City Council on a platform of improved communication and You (so 2006). She's going to have to do some fancy dancing to explain the how she is using the NC Realtors' favorite choreographer, Campaign Connections and has been raking in mucho dinero working the tables of Big Real Estate

Support Transfer Tax

It's not rocket science

Time to see this one again.
Support Transfer Tax

NC Weathering Real Estate Storm

Reed Construction Data, Building Team Forecast:
Raleigh, Austin and Charlotte are Most Intense Housing Markets in U.S.
Jim Haughey -- August 31, 2007

The most intense housing development in the U.S., excepting resorts and small college towns, is currently taking place in three mid-size southern cities: Raleigh, Austin and Charlotte. Homebuilding is increasing in each of these cities and home prices are rising from modest levels.

Financing is coming largely from prime, conforming mortgages. Home demand is from both existing residents, not forced to postpone buying by falling home prices, and from households moving into the area for jobs. Businesses and families are attracted by low operating and housing costs. In a strong economy, these sources of housing demand are insulated from the home-price and mortgage-finance problems elsewhere in the country.

New York Times, Business:
Drop Foreseen in Median Price of U.S. Homes
David Leonhardt and Vikas Baja, August 26, 2007
Graphic: Home Prices Across the Nation
Charlotte growth rate slows slightly but outperforms national median even when adjusted for inflation - only Portland & Seattle fare better.

Raleigh News & Observer, Business:
Housing Prices Up More in Triangle
Dudley Price, August 31, 2007

Triangle home prices in the second quarter rose despite a national housing slump that slowed U.S. price appreciation to its slowest pace in a decade, according to a government report.

Prices of existing single-family homes in Raleigh-Cary rose at a rate of 7.1 percent compared with a year earlier, the Office of Federal Housing Enterprise Oversight reported Thursday. Durham resale prices rose at a rate of 5.4 percent compared with a year before.

By comparison, prices nationally rose 3.2 percent, the agency known as OFHEO said. That was the smallest gain since 1997 and came as lenders tightened mortgage requirements.

"To this point, you've bucked the trend," said Michael Helmar, an economist for Moody's Economy.com, who tracks the Triangle housing market.

Triangle Business Journal
Triangle housing prices rise faster than national average
According to figures released Thursday, August 30, 2007, by the U.S. Office of Federal Housing Enterprise Oversight:

Home prices grew at a 7.1 percent annualized rate in the Raleigh-Cary Metropolitan Statistical Area, which includes Wake, Franklin and Johnston counties. The Durham MSA, which includes Durham, Orange, Chatham and Person counties, saw prices grow by 5.4 percent.

Nationally, housing prices grew at a 3.2 percent annualized clip - the smallest gain, OFHEO said, in more than 10 years.

There are warning signs for people who are vulnerable to property tax increases:

Sales of existing homes in the Triangle have slipped in recent months as low- and moderate-income borrowers have defaulted on their home payments.

But the area has avoided the worst of the problem, seen in states such as California.

New County Authority Referenda FAQ

Frequently Asked Questions regarding new county authority referenda from the NCACC

The 2007 State Appropriations Act (H1473) provides counties with the authority to levy either a land transfer tax (up to 0.4 percent) or a local sales tax (0.25 percent), following approval in a non-binding advisory referendum. H1473 creates two new articles under G.S. 105 — Article 60 for the local option land transfer tax (H1473 SECTION 31.17.(a)), and Article 46 for the local option ¼ cent sales tax (H1473 SECTION 31.17.(b)).

Question: Can a county hold an advisory referendum on the new revenue authority on the ballot of the municipal elections to be held this fall?

Answer: Yes, as long as the county is a “November” county in the upcoming municipal elections, and the county notifies the State Board of Elections of its intent to include the advisory referendum on the ballot no later than Sept. 4, 2007 (according to Director of the State Board of Elections). If the county is an “October” county (approximately 20 counties), it is too late to get the advisory referendum on the municipal election ballot. Please confer with the State Board of Elections and your local board of elections to determine whether you are an “October” or “November” county.

Question: What are the steps a county needs to consider when scheduling a referendum?

Answer: Any county that is subject to Section 5 of the Voting Rights Act of 1965 will need to submit its request for pre-clearance no later than Aug. 31, 2007. The State of North Carolina has already submitted its request for pre-clearance of the authorizing legislation to the U.S. Attorney General.

All counties must contact their local board of elections and the State Board of Elections in order to have the advisory referendum included on the ballot. See Question #1 for deadlines.

If a county is unable to get the advisory referendum on the ballot, it may call for and hold a special election. The special election may not be held within the period of time beginning 30 days before and ending 30 days after the date of any other primary, election, special election or referendum.

Question: Can the ballot include advisory referendums for both the land transfer tax and the quarter-cent sales tax?

Answer: Yes – both are authorized under state law. If both referenda pass, then the Board of Commissioners would have to choose which one to authorize, if they so desired. They cannot enact both.

Question: Must the Board of County Commissioners levy a tax if the voters approve a referendum for either the local option transfer tax, sales tax or both?

Answer: A Board of County Commissioners is not obligated to levy a tax if the majority of those voting in a referendum on either the land transfer tax or sales tax vote in support of a levy.

Question: Can a county stipulate uses of the monies on the ballot as a part of the referendum?

Answer: A county may not stipulate the use of the money on the ballot.

Question: Is there a prescribed format for the question of the ballot?

Answer: Yes. Legislation specifies how the question must be presented on the ballot:

Land Transfer:

Ballot Question – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be: '[ ] FOR [ ] AGAINST

Real property transfer tax at the rate of up to [X] percent [X%] of value or consideration.'

Note: The land transfer tax amount can be set at a rate up to .4%, in increments of .1%.

Sales Tax:

Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be: '[ ] FOR [ ] AGAINST

Local sales and use tax at the rate of one-quarter percent (0.25%) in addition to all other State and local sales and use taxes.'

Note: The sale tax amount is set at a rate of .25%.

Question: When is the earliest the sales tax will become effective if the Board of County Commissioners levies the sales tax via resolution (following a referendum) during November 2007?

Answer: April 1, 2008, so long as the resolution levying the tax is adopted in November 2007. The sales tax may become effective on the first day of any calendar quarter so long as the county gives the Secretary of Revenue at least 60 days' advance notice.

Question: When is the earliest the land transfer tax will become effective if the Board of County Commissioners levies the land transfer tax via resolution (following a referendum) during November 2007?

Answer: Jan. 1, 2008, so long as the resolution levying the tax is adopted in November 2007. The tax may become effective only on the first day of a calendar month set in the resolution levying the tax, which may not be earlier than the first day of the second succeeding calendar month after the resolution is adopted.

Question: Are there restrictions on the use of either of the new local option tax revenues?

Answer: Land transfer tax revenues are expressly authorized to be used for any lawful purpose. The sales tax is not restricted or earmarked.

Question: If the referendum fails, can a county hold a subsequent referendum on the same question, and if so, must a county wait a certain period of time prior to holding another referendum?

Answer: Per Gerry Cohen (N.C. General Assembly Bill Drafting), there are no restrictions on resubmitting a land transfer tax or the new quarter-cent sales tax to the voters again if it has failed.

As with any local legal matter, we ask that you consult with your county attorney and county board of elections as you consider these local referendum options.

Public Problems and Campaign Corrections

$818,773.81 - that's the new running total spent by the NC Association of Realtors in trying to defeat local options for local governments. Lobbying reports released today showed that NCAR spent $148,835.51 in the month of July. About half that was spent on media time. Payments were also made to shills Sinclair and Crone through consulting firms Public Solutions and Campaign Connections. The pair recently announced a new poll that has serious credibility problems. Under the Dome tracked numerous errors in the poll, very publicly. Maybe they need new names: Public Problems and, Campaign Corrections.
[Update: I've had my fun with this one but I've since learned that a combination of haste and personal circumstance led to incomplete editing of the original poll data.]

Basnight on Transfer Tax

Senator Marc Basnight recently issued this statement in response to inquiries regarding the passage of the transfer tax local funding option.

Thank you for contacting my office regarding your opposition to the so-called “Home Tax” or transfer tax. I appreciate hearing from you about this important matter.

As you may know, the North Carolina General Assembly recently provided counties with the authority to put a transfer tax on the ballot for consideration by voters. It is important to understand that this action does not impose a transfer tax in any community in North Carolina – it simply gives voters the opportunity to decide this issue for themselves.

I supported this policy because North Carolina is a fast-growing state with many diverse communities – some of which may decide that a transfer tax is the best way for them to build badly needed schools, roads and other critical infrastructure. Others may decide this kind of tax is not appropriate for their community.

I also supported giving this authority to local governments because my colleagues in the House of Representatives insisted that it be part of an agreement to provide relief for counties from the cost of providing Medicaid health coverage to their citizens. For many rural communities, the cost of the local share of Medicaid has grown so large that it prevented them from investing in schools and other essential services. Relieving counties of this burden was a major goal of the Senate; however, the House demanded that communities be provided the opportunity to consider a transfer tax as a condition of the approving a plan for Medicaid relief.

While the Senate held out for months on this issue, an agreement was finally reached: counties would be provided relief from Medicaid costs as required by the Senate and the transfer tax authority would be given to local communities at the insistence of the House of Representatives.

I hope this information is help in understanding this complicated and important issue. Please let me know if I can provide you with any additional information or assistance.

Sincerely,

Marc Basnight

Please Don't Play Red River Valley

Stormwater run-off is not an abstract concept. Stormwater run-off is not a municipal election. It's what happens when someone upstream doesn't keep the dirt on their own property. Environmental protections may seem like an abstract concept but they are real private property protections that realtors and homebuilders would like to roll back in the name of housing affordability. How affordable is a house when you are knee deep in red mud?

Stormwater Runoff - Asheville NC 7-27-2007
July 27th runoff event below the Grove Park Cove development in Asheville. Follow a picture diary of this problem over the last year and check out the Mountain Voices Alliance to see how North Carolina's mountains are being eroded by development. Updated 11/17/12 with current video links.

Infrastructure Collapse: No Comment

Click image or here for BBC News Photogallery and read this report:  AAA: N.C. bridges need work

NC Budget Approved

2009 Update:

It seems a lot of people are looking for the 2009 NC Budget and are ending up at this post. The 2009-01 budget had been approved by the NC House and Senate 8/5/09 and was signed by Governor Beverly Perdue 8/7/09. The official text of the budget bill, Senate Bill 202, and the related Money Report are available at ncleg.net . A related technical corrections bill, House Bill 836, passed 8/7/09 makes modifications to Appropriations based on passage of SB 202.

2008 Update:

It seems a lot of people are looking for the 2008 NC Budget and are ending up at this post, so here is a direct link:
New - Bill Text - House Bill 2436, 2008-2009 State Budget, signed into law 3:52 pm, July 16, 2008 as SL 2008-107

At 4:24pm the NC House gave a final vote to approve the budget that includes Local Options
At 4:29pm the NC Senate gave its final vote to approve the budget that includes Local Options

There was some ritual debate in the House, none in the Senate. The bill now goes to Governor Mike Easley for signing into law.

Also of note, the NC Home Builders PAC took in $175,767.50 in the first half of 2007 and spent $38,206.54 leaving it with $409,242.08 cash on hand.

UPDATE: The Budget Bill was signed by the Governor on Tuesday July 31st. For the full bill go to:
House Bill 1473, State Budget, as enacted on 7/31/2007, S.L. 2007-323 (PDF Document 1171 KB)
or for financial synopsis:
The Joint Conference Committee Report on the Continuation, Expansion and Capital Budgets on House Bill 1473, July 27, 2007 (PDF Document 652 KB)

Local Option County Taxes

Language from Proposed Conference Committee Substitute H1473-PCCS30527-LRxf-4, The 2007 Appropriations Act. This is what it was all about:

LOCAL OPTION COUNTY TAXES
      SECTION 31.17.(a) Chapter 105 of the General Statutes is amended by adding a new Subchapter to read:
      "SUBCHAPTER X. LOCAL OPTION COUNTY TAXES.
            "Article 60.
            "Land Transfer Tax.
"§ 105-600. Short title.
   This Article is the County Land Transfer Tax Act.
"§ 105-601. Levy.
   (a) Authority. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax, the board of county commissioners may, by resolution and after 10 days' public notice, levy a local land transfer tax on instruments conveying interests in real property located in the county, up to a rate of four-tenths percent (0.4%), in increments of one-tenth percent (0.1%).
   (b) Vote. – The board of county commissioners may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local land transfer tax in the county as provided in this Article. The election shall be held on a date jointly agreed upon by the board of county commissioners and the board of elections and shall be held in accordance with the procedures of G.S. 163-287.
   (c) Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:
            '[ ] FOR [ ] AGAINST
      Real property transfer tax at the rate of up to [X] percent [X%] of value or consideration.'
   (d) Resolution. – The board of county commissioners must, upon adoption of a resolution levying a tax under this Article, immediately deliver a certified copy of the resolution to the register of deeds of the county, accompanied by a certified statement from the county board of elections setting forth the results of the special election approving the tax in the county. Upon receipt of these documents, the register of deeds shall administer the tax in the county as provided in this Article.
   (e) Limitation. – A tax levied under this Article may not be in effect in a county at the same time as a tax levied under Article 46 of this Chapter.
"§ 105-602. Scope of tax.
   (a) Scope. – A tax levied under this Article does not apply to transfers exempt pursuant to G.S. 105-228.28 or G.S. 105-228.29 from the tax levied by Article 8E of this Chapter. The tax is in addition to the tax levied by Article 8E of this Chapter. A tax levied under this Article applies to transfers of interests in real property located within the county. If the property is located in two or more counties, a transfer of an interest in the property is taxable only by the county in which the greater part of the property, with respect to value, lies.
   (b) Basis and Effective Date. – A tax levied under this Article applies to the consideration or value, whichever is greater, of the interest conveyed, including the value of any lien or encumbrance remaining on the property at the time of conveyance.
The levy of the tax may become effective only on the first day of a calendar month set in the resolution levying the tax, which may not be earlier than the first day of the second succeeding calendar month after the date the resolution is adopted.
"§ 105-603. Administration and use.
   (a) Administration. – A tax levied under this Article is payable by the transferor of the interest. Except as otherwise provided in this Article, the provisions of G.S. 105-228.32 through G.S. 105-228.37 apply to a tax levied under this Article. The county must provide metering or similar equipment for the collection of the tax in lieu of the use of tax stamps.
   (b) Use. – The proceeds of a tax levied under this Article may be used for any lawful purpose.
"§ 105-604. Repeal or reduction.
   A county may, by resolution, repeal or reduce the rate of a tax levied under this Article. Repeal or reduction of the tax must become effective on the first day of a month and may not become effective until the end of the fiscal year in which the repeal or reduction resolution was adopted. Repeal of a land transfer tax, or reduction of its rate, under this Article does not affect a liability for a tax that attached before the effective date of the repeal or reduction, nor does it affect a right to a refund of a tax that accrued before the effective date of the repeal or reduction."
      SECTION 31.17.(b) Subchapter VIII of Chapter 105 of the General Statutes is amended by adding a new Article to read:
            "Article 46.
            "One-Quarter Cent (1/4¢) County Sales and Use Tax.
"§ 105-535. Short title.
   This Article is the One-Quarter Cent (1/4¢) County Sales and Use Tax Act.
"§ 105-536. Limitations.
   This Article applies only to counties that levy the first one-cent (1¢) sales and use tax under Article 39 of this Chapter or under Chapter 1096 of the 1967 Session Laws, the first one-half cent (1/2¢) local sales and use tax under Article 40 of this Chapter, and the second one-half cent (1/2¢) local sales and use tax under Article 42 of this Chapter.
"§ 105-537. Levy.
   (a) Authority. – If the majority of those voting in a referendum held pursuant to this Article vote for the levy of the tax, the board of county commissioners may, by resolution and after 10 days' public notice, levy a local sales and use tax at a rate of one-quarter percent (0.25%).
   (b) Vote. – The board of county commissioners may direct the county board of elections to conduct an advisory referendum on the question of whether to levy a local sales and use tax in the county as provided in this Article. The election shall be held on a date jointly agreed upon by the board of county commissioners and the board of elections and shall be held in accordance with the procedures of G.S. 163-287.
   (c) Ballot Question. – The form of the question to be presented on a ballot for a special election concerning the levy of the tax authorized by this Article shall be:
            '[ ] FOR [ ] AGAINST
      Local sales and use tax at the rate of one-quarter percent (0.25%) in addition to all other State and local sales and use taxes.'
   (d) Limitation. – A tax levied under this Article may not be in effect in a county at the same time as a tax levied under Article 60 of this Chapter.
"§ 105-538. Administration of taxes.
   Except as provided in this Article, the adoption, levy, collection, administration, and repeal of these additional taxes must be in accordance with Article 39 of this Chapter. A tax levied under this Article does not apply to the sales price of food that is exempt from tax pursuant to G.S. 105-164.13B. The Secretary shall not divide the amount allocated to a county between the county and the municipalities within the county.
Notwithstanding the provisions of G.S. 105-467(c), during the 2008 calendar year a tax levied under this Article may become effective on the first day of any calendar quarter so long as the county gives the Secretary at least 60 days' advance notice of the new tax levy."

Update Saturday 2:09pm Budget passed 65-33 second reading in House, having passed second reading in Senate earlier.

Transfer Tax Still in Budget

The land transfer tax option is still in the North Carolina State Budget deal after House and Senate caucus meetings yesterday and despite the best attempts of the Realtor and Homebuilder lobbyists to derail it. The bill is currently being printed with an expectation that it will be read and voted on Saturday with a final vote in the early hours of Sunday. For updates check the Transfer Tax News feed over on the right. Mark Binker's Capital Beat and Laura Leslie's Isaac Hunter's Tavern have been producing the most timely after hours reports in their blogs which supplement their primary media, print and radio. Also check Under the Dome throughout the day.

Transfer Tax In Budget Deal

The Associated Press is reporting that the NC House and Senate have agreed on a state budget that includes a local transfer tax option. The story from WRAL which first reported it online:
NC Lawmakers Reach Tentative Deals on Spending, Taxes, Medicaid

Raleigh — House and Senate negotiators reached tentative agreements late Wednesday on a two-year budget that would make a "temporary" sales tax increase permanent and let counties raise additional taxes for school construction and infrastructure.

The deal, which requires final approval as part of the compromise spending plan presented to the full House and Senate, also would transfer the counties' share of Medicaid expenses to the state in a three-year phase out, House and Senate Democratic leaders said.

The two sides also agreed to give counties, with local voter approval, the right to raise either sales taxes by a quarter of a cent or the land transfer tax from 0.2 percent of the sales price to 0.6 percent.

The transfer tax was a major obstacle in the budget talks that began last month, as the North Carolina Association of Realtors spent nearly $600,000 this year on a public campaign opposing what it called the "NC Home Tax."

Several Senate Democrats have balked at the transfer tax option, but Senate Majority Leader Tony Rand expressed confidence Wednesday night that the proposal, as incorporated in the final budget bill, would pass his chamber.

"I believe that we'll be fine," said Rand, D-Cumberland.

UPDATE:
I just picked up the News & Observer from my driveway and the story did not get into print. Laura Leslie of WUNC was working even later on this story last night and has even more detail in her blog, Isaac Hunter's Tavern, even as she works on her morning radio: Wed. Late Edition: "Done Deal"?. The Greensboro News-Records's Mark Binker was also working late on this and has his updates: The tentative budget deal.

Ethics Shmethics

I swear I'm not making this up:

Code of Ethics Sets REALTORS® Apart
Here’s a general overview of just a few of the key principles REALTORS® willingly agree to under the Code:
· REALTORS® avoid practices, which may harm the public.
· REALTORS® do not exaggerate, misrepresent or conceal facts related to property or transactions.
· REALTORS® protect and promote their clients’ interests and treat all parties fairly.
· REALTORS® represent themselves truthfully in advertising and other public forums.

Here's what the NCAR Executive Vice President, said in a letter to the News & Observer:

After taxes and business/marketing expenses, Realtors had a net average income of $28,000.

Here's what NCAR put in its 2007 Media Kit:

NCAR Members Earn Higher Incomes
REALTORS® had a median household income of $102,330 in 2004 (last year data is available). That’s 132 percent greater than the typical American median household income of $44,389. REALTORS® median annual personal income in 2004 was $49,300. Almost one-quarter of REALTORS® had incomes that exceeded $100,000.

Would the REAL® REALTOR® income please stand up?

APFO, Moratorium, Impact Fee

Get ready to hear these terms more often if realtors' and homebuilders' efforts to defeat a transfer tax option are successful. The most immediate impact of success in their statewide campaign to sideline your vote on a local transfer tax option will be pressure to increase county property tax and sales tax. Whatever number of North Carolinians oppose a transfer tax, a large majority is bound to oppose increases in property or sales tax. This will leave homebuilders in the cross hairs for funding of schools and infrastructure associated with growth.

An APFO is an Adequate Public Facilities Ordinance, a growth management mechanism that can be locally enacted.

It is designed to prevent a community’s growth from outpacing the local government’s ability to provide necessary public facilities to serve that growth. It also can be used to channel growth into geographic areas (and school attendance zones) that are more capable of handling new development.
The primary APF criterion requires developers seeking project approval to show that currently available public facilities have adequate capacity to accommodate the project—or will have such capacity when the project is ready for occupancy.

Developers can make contributions to "speed up the adequacy". An APFO doesn't stop growth and doesn't slow it if developers are willing to step up to the plate for schools, water, sewer, jails, parks, fire stations and other public facilities.

A Moratorium is self explanatory. It stops a development activity in its tracks, until a community can get a handle on it. When a Moratorium is lifted a frenetic period of chaos can ensue as pent-up demand lets loose. APFOs help temper the frenzy. A Moratorium is a blunt instrument. Temporarily effective, but blunt and inefficient in the long run.

Impact Fees are a more direct way of tying new growth to community impacts:

Impact fees are payments required by local governments of new development for the purpose of providing new or expanded public capital facilities required to serve that development. The fees typically require cash payments in advance of the completion of development, are based on a methodology and calculation derived from the cost of the facility and the nature and size of the development, and are used to finance improvements offsite of, but to the benefit of the development.

The North Carolina public has shown more support for Impact Fees than Transfer Tax. As with transfer tax, the State Legislature must authorize the use of impact fees by local governments. Impact fees on an individual home would be substantially higher than any transfer tax amount but the benefits to developers can be more clearly demonstrated and linked, including job growth.

While impact fees often do not reflect the full price of infrastructure improvements, fees do make the economic linkage between those paying for and those receiving benefits more direct, and so promote economic efficiency. The obvious direct economic benefits include the actual infrastructure investment, such as new roads, new schools, and new water and sewer extensions. Indirect benefits include improved predictability in the marketplace, knowing when and where infrastructure investment will occur, and that all developers are treated equitably.