Update: This version of the story contains comments in support of HB 168 by BASE CEO Cameron Moore.

Two proposals before the General Assembly are drawing opposition from Brunswick and New Hanover counties.

One is the Sales Tax Fairness Act, part of the N.C. Senate’s budget proposal, which maps out a new plan to distribute sales tax revenues to counties largely based on a per capita basis, rather than primarily based on where the purchase was made.

The other is House Bill 168, which would give a tax exemption for properties held for sale by builders, including an exemption for some qualifying commercial and residential property for up to five years.

Legislators backing the Sales Tax Fairness Act say that it would distribute revenues more equitably, citing the fact that many residents of rural counties do much of their shopping in nearby metropolitan centers, where most of the sales tax remains, rather than benefiting the shopper’s county of residence.

The bill would shift the distribution of local sales taxes from a 25 percent per capita/75 percent point of delivery formula to an 80 percent per capita/20 percent point of delivery formula by Oct. 1, 2019 in a five-year phased enactment, according to the N.C. Association of County Commissioners.

Senate majority leader Harry Brown (R-6th district), a proponent of the Sales Tax Fairness Act, plans to hold a press conference Tuesday in Raleigh to promote the proposal and “address the opposition,” according to a news release from his office.

“There are several structural disadvantages the areas of the state outside the Triangle and Mecklenburg County face, including a lack of economic incentive money, infrastructure and population loss,” Brown said in the release. “However, in my opinion the single biggest disadvantage the struggling parts of our state face is the way the local portion of the sales tax is distributed.

"Under the current system, residents drive to major urban areas to shop and leave seventy-five cents of every dollar they spend in the urban commercial area. A fairer system would allow North Carolina counties to benefit from the tax dollars their own citizens pay – so they have the local resources necessary to strengthen public education, attract new jobs and contribute to the state’s economy."

Brown said his plan would ensure that "citizens from the state’s rural counties no longer involuntarily subsidize a few rich, urban counties when they drive to those areas to spend their money."

Brunswick County Board of Commissioners has gone on record opposing various pieces of legislation – including the Sales Tax Fairness Act, the most recent version – introduced this year to modify the sales tax revenue distribution. 

“Using information from the Fiscal Research Division, Brunswick County Finance staff projected Brunswick County’s growth and projected sales tax revenue in future years under the current distribution method. Staff then compared that amount to the projections in the latest sales tax proposal,” county officials stated in a news release last Friday.

The most recent projections show the county losing more than $1 million per year through fiscal year 2019-20 under the proposed plan, for a total of nearly $5.8 million, compared to what it would realize from the current distribution method.

When looking at county and municipality sales tax revenues, the revenue losses are even greater, the Brunswick County news release continued.  

“Brunswick County and its municipalities combined will lose a total of $9.64 million between fiscal year 2016-17 and fiscal year 2019-20 with the proposed sales tax legislation, compared to projections under the current sales tax method, if current trends continue.”

New Hanover County officials figure that the county could lose as much as $7.6 million in sales tax revenue in fiscal year 2019-20 alone under the proposed plan, according to a letter board of commissioners chairman Jonathan Barfield wrote the county's state delegation in June.

Barfield said Monday the board is “adamantly opposed” to any change in sales tax redistribution, saying it would force the county to ask the voters for an additional one-quarter-cent local sales tax, which would raise the local rate to 2.5 cents and the total sales tax rate to 7.25 cents.

“We did that in 2010, and would have to take the resources raised through that and send them elsewhere,” if the Sales Tax Fairness Act becomes law, Barfield said.

“We have invested in this community for many years," he said, citing various infrastructure projects, including water and sewer. Barfield added that money from sales taxes has enabled the county to pursue economic development initiatives, transforming it from a rural area to a “hub” of economic activity. That requires fire, police and other public services that local residents pay for, he said.

Barfield expressed concern as well that, if the act were approved, the state might just keep the sales tax monies, so that “local governments would have to try and figure out how to fill that gap.”

The tax exemption proposed for builders in HB 168 would apply to commercial properties for a maximum of five years, while the residential property exemption would apply for a maximum of three years, the Brunswick County news release stated, adding “Though amounts vary each year, Brunswick County could lose an estimated $1.5 million in property tax revenue each year under the proposed legislation.”

New Hanover also opposes HB 168. In a letter from budget director Cam Griffin and finance director Lisa Wurtzbacher to Rep. Ted Davis (R-New Hanover), the officials stated: “In New Hanover County alone, single family homes built in 2014 were approximately 875 at an approximate value of over $206 million. This equates to over $1 million in revenues for New Hanover County.”

The bill, which is now in the Senate Finance Committee, would spur more development of residential and commercial property, said Cameron Moore, the CEO of the Business Alliance for a Sound Economy (BASE), the legislative affairs arm of the Wilmington-Cape Fear Home Builders Association (WCFHBA).

"We have an understanding of what the bill is trying to do," Moore said Monday afternoon. "The Wilmington-Cape Fear Home Builders Association and the North Carolina Home Builders Association are working in a coordinated way, looking for tools to get the economy jump started."

Moore said that a study commissioned by the NCHBA and the National Home Builders Association indicated that allowing developers to hold off on paying taxes on the improvements to their land would generate about $32 million in additional development activity in the state.