ORANGE COUNTY

BOARD OF COMMISSIONERS

 

ACTION AGENDA ITEM ABSTRACT

 

Meeting Date:

September 25, 2007

 

 

Action Agenda

 

Item No.

     

 

SUBJECT:   Orange County/Chapel Hill Carrboro City Schools/Orange County Schools Topics of Interest

 

DEPARTMENT:   County Manager/Budget/CHCCS/OCS

PUBLIC HEARING:  (Y/N)

No

 

 

 


ATTACHMENT(S):

As listed in “Background”

 

 

INFORMATION CONTACT:

Laura Blackmon, (919) 245-2300

Donna Coffey,   (919) 245-2151

Neil Pedersen, (919) 967-8211

Shirley Carraway, (919) 732-8126


 



PURPOSE: To discuss various issues with policy and/or financial implications that are of interest to the Orange County Commissioners, Chapel Hill Carrboro City Schools Board of Education and/or Orange County Schools Board of Education.

 

BACKGROUND:  At the September 6, 2007 meeting of the School Collaboration Work Group, members agreed to structure the meeting for this September 25 joint work session around the following agenda items:

 

  1. Review of Revenue Options Available to County to Replace Sales Tax and Other County Revenues to be Taken by the State (including Lost and New Revenue Sources and Amounts and Options Available to Orange County by Referendum)

 

a.      Medicaid Relief/Sales Tax Swap

 

For many years, counties across the state have asked legislators to relieve them of mandated Medicaid expenditures.  The General Assembly responded this year by approving a three-year phased in plan whereby the State will relieve counties of their Medicaid expenses.  As the state assumes County Medicaid expenses, it will, in turn, take over a portion of the local option sales tax revenues.

 

It is important to note that while the State will assume Medicaid costs beginning in the current fiscal year, the loss of sales tax monies will likely result in Orange County having less revenue than in past years to continue to meet county responsibilities.  The attached “County Medicaid Relief/Sales Tax Swap Staff Analysis” spreadsheet provides a detailed fiscal analysis of the impact of the recent legislation related to Medicaid Relief and Sales Tax.

 

Attachment- 1 – aCounty Medicaid Relief/Sales Tax Swap Staff Analysis

 

    1. Local Revenue Options

 

Local governments in North Carolina have historically relied heavily upon ad valorem property taxes as their major source of revenue. For a number of years, the Orange County Board of County Commissioners, the North Carolina Association of County Commissioners and many other Boards across the state, have lobbied the General Assembly for legislative authority to expand counties’ revenue options and lessen counties’ reliance on property taxes.  During the 2007 legislative session, the General Assembly granted counties the ability to enact new revenue options.

 

The new revenue options available for counties include a .4% land transfer tax and an additional ¼-cent sales tax.  There are several important factors related to the new options:

·        Counties must have voter approval in order to enact either of these taxes

·        The ballot can include referenda for both the land transfer tax and the ¼-cent sales tax

·        There are no restrictions on the use of either of the new local revenues

·        Should the Board choose to voluntarily designate the uses of the new revenue(s) (for example for capital infrastructure or to retire debt), the ballot language cannot stipulate uses of the new revenues

·        Counties cannot enact both revenues - should Commissioners include both referenda on the ballot and voters agree to both of them, Commissioners would have to choose which local revenue to authorize

 

With regard to the financial impact of the newly enacted revenue options, it is important to note that an affirmative vote in May 2008 would result in proceeds from the new revenue beginning during the upcoming 2008-09 fiscal year.  Other pertinent specifics related to the individual revenue options include:

 

·        1/4 Cent Sales Tax

o       September 1, 2008 is the earliest date that the sales tax would become effective if Commissioners levied the sales tax via resolution following a May 2008 referendum.

o       The State would distribute the new ¼-cent sales tax to counties based on point of delivery and not on a per capita basis.

o       As authorized, the new sales tax would not apply to food purchases.

o       There are no legislative requirements for counties to share the newly authorized ¼-cent sales tax with local municipalities.

o       Based on information received from the NC Association of County Commissioners, Orange County can expect $3,031,453 from the ¼-cent sales tax – the equivalent of about 2.4 cents in current ad valorem property tax.

o       According to statistics, a family of three with a median income of $55,000 per year could expect to pay an additional $51 per year with the new ¼-cent sales tax.

  

o       Should Commissioners receive voter approval of the land transfer tax on May 6, 2008, the effective date of the tax would be July 1, 2008.

o       The County currently levies a .2% land transfer tax – more commonly referred to as “deed stamps”.  The newly authorized land transfer tax would increase the tax by .4% bringing the total charge to .6% of the real estate sale price.

o       The Register of Deeds Office collects the current .2% deed stamp revenues at the time of real estate sales.  As mandated by the State, the Register of Deeds remits 50% of the current .2% deed stamps collections to the State of NC.  During fiscal year 2006-07, Orange County collected $2,056,539 in deed stamps and remitted one-half of that amount ($1,028,270) to the State as their share of the collections.

o       There are no legislative requirements for counties to share the newly authorized .4% land transfer tax with the State or with local municipalities.

o       Based on information received from the NC Association of County Commissioners, Orange County can expect $4,013,532 from the land transfer tax – the equivalent of about 3.2 cents in current ad valorem property tax.

o       A .4% land transfer tax would equate to $800 on a home sold for $200,000 and $2,000 on a home sold for $500,000.  Both of these would be in addition to the .2% deed stamps currently collected by the Register of Deeds.  The Register of Deeds would collect the monies at the time of sale.

 

On September 19, 2007, Commissioners decided to seek voter approval of the local revenue options on the May 6, 2008 ballot.  At that time, Commissioners also decided to seek input from community partners regarding which tax(es) to include on the ballot and possible uses of the new revenues.

 

The timeline that follows offers a general sense of actions that need to occur in order for the revenue question(s) to be on the May 6 ballot.  At the September 19 meeting, Commissioners agreed to the dates associated with the first three actions outlined in the timeline.  Further Board discussion regarding the timeline will occur during the months of October and November 2007.


 

 

Action

Target Date

BOCC declares its intention to appoint a Local Revenue Options Community Advisory Group, the next steps would be:

·        Adopt Resolution of Intent to Create Local Revenue Options Community Advisory Group

·        Approve Advisory Group Charge

·        Determine structure of Advisory Group

October 9, 2007

Advertise for Local Revenue Options Community Advisory Group volunteers

October 10 through 24, 2007

BOCC review advisory group applications and appoint volunteers

November 5, 2007

Organizational meeting of Local Revenue Options Community advisory Group

No later than November 16, 2007

Local Revenue Options Community Advisory Group Meetings

Completed no later than January 11, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Report from Local Revenue Options Community Advisory Group to BOCC

January 29, 2008

Final decisions regarding

  • Use of new revenues
  • Which tax(es) to include on the ballot
  • Next steps - Public Education Initiative

 

No later than February 19, 2008

Notify Orange County Board of Elections of Board’s Intent to Seek Voter Approval of Local Revenue Option(s) on May 6, 2008

No later than February 29, 2008

Public Education Initiative (examples might  include informational brochures mailed to voters and distributed at major community functions and newspaper articles by community leaders)

February, March, April 2008

Primary Election

May 6, 2008

 

 

 

  

2.      Update on County, Schools and Durham Technical Community College Partnership

County staff, along with Superintendents from Chapel Hill Carrboro City and Orange County Schools, and representatives from Durham Technical Community College (“DTCC”) met on September 7, 2007 to discuss items of mutual interest.  In summary:

 

o       DTCC reports that the new campus is on target for completion in January 2008 with curriculum classes beginning Fall 2008 Semester

o       Plans also include spring and summer 2008 offerings of Continuing Education classes. 

o       Transportation to and from the DTCC Orange County Center at Waterstone is a concern for both school systems.  A future meeting will be scheduled among the County, Schools and providers to discuss alternatives for providing an acceptable level of transportation services to the site.

o       In addition, there are concerns regarding student interest in the Middle College High School currently offered through a partnership with DTCC and the Chapel Hill Carrboro, Orange County and Durham Public school systems.  The Superintendents and DTCC representatives agreed to meet for further discussions regarding the Middle College.

 

Attachment- 2 – a – CHCCS Memorandum from Denise Bowling to Neil Pedersen Regarding Middle School High School

 

Attachment – 2 – b – Chart – Orange County Schools, Middle College High School at Durham Technical Community College

 

3.      Update on Carolina North

County and School staff have been involved in various phases of the Chapel Hill North project.  During the work session time allotted for this topic, staff plans to provide project updates including an update of the fiscal analysis of the project.  The attached September 5, 2007 letter from the Chair of the Chapel Hill Carrboro City Schools Board Chair to Jack Evans offers additional information regarding this topic.

Attachment – 3 – aSeptember 5, 2007 letter from the Chair of the Chapel Hill Carrboro City Schools Board Chair to Jack Evans

 

4.      Possible Topics for Collaboration Work Group, November 2007 through May 2008

At the September 6, 2007 meeting of the School Collaboration Work Group, members of the Group aligned a number of topics with their meeting timetable through May 2008.  In addition, Work Group members agreed to ask their colleagues during the September 2007 Joint meeting for additional discussion ideas.  The list below offers discussion topics agreed upon by the Work Group.

 

November 2007

·        Discuss and follow up on September 25, 2007 Joint Boards meeting

·        Discuss ideas for how best to educate the public about the new local revenue options

·        Discuss of appropriate levels of Schools’ Fund Balance.

·        Staff updates on Carolina North, Middle College High School, Partnership with Durham Technical Community College, and 2007-08 budget timeline

 

January 2008

·        Substantive budget discussion including fair funding and land acquisition issues

 

March 2008

·        Review and discussion of Schools Adequate Public Facilities Ordinance (SAPFO)

 

May 2008

·        Follow up on prior topics, as needed

 

The discussion time tonight offers an opportunity for Commissioners and School Board members from both school districts to suggest additional topics for the Work Group.

 

There are no attachments associated with Item 4.

 

5.      Timelines - Fiscal Year 2008-18 Capital Investment Plan (CIP) and 2008-09 Annual Operating Budget

Historically, timing of Commissioners decisions regarding the county’s annual operating budget and long range capital plan has been compressed into short timeframes spanning between May and June of each year.  Over the last few years as the County’s budget has become more complex and the County’s revenue growth has slowed, there has been an emerging need to develop budget and CIP timelines that spans several months.  On August 30, 2007, Commissioners approved timelines that allow for more thorough review and analysis - hopefully leading to a more efficient and collaborative decision making process.

The attached Fiscal Year 2008-18 Capital Investment Plan (CIP) and 2008-09 Annual Operating Budget calendars reflect the timelines approved by the Board of County Commissioners on August 30, 2007.

Attachment- 5 – a – FY 2008-19 Capital Investment Plan (CIP) Timeline

 

Attachment – 5 – b – 2008-09 Budget Process Timeline

 

6.      Schools’ Capital Needs

As outlined in the approved 2008-19 Capital Investment Plan (CIP) timeline (Attachment 5-a of this agenda abstract), each school district plans to highlight major capital needs for their respective school system.  The County Manager’s Recommended 2008-18 CIP, scheduled for presentation to Commissioners and the public on October 23, will provide more detailed information regarding the County and each district’s long range capital needs.

Attachment- 6 – a – Chapel Hill Carrboro Capital investment Plan FY 2008-18

 

Attachment – 6 – b – Orange County Schools Capital Investment Plan

 

7.      Schools’ Budget Drivers

This work session offers each school district an opportunity to preview preliminary budget drivers for the upcoming 2008-09 fiscal year.   In accordance with the approved 2008-09 budget timeline (attachment 5-b of this agenda abstract), County staff plans to provide a preliminary look at anticipated county budget drivers at the Commissioners’ October 18, 2007 work session.

Attachment- 7 – a – Chapel Hill Carrboro City Schools Budget Drivers for 2008-09

 

Attachment – 7 – b – Orange County Schools Budget Drivers for 2008-09

 

8.      Open Time for Board Members Comments

 

 

FINANCIAL IMPACT: Financial impacts are identified in the individual items listed above and in associated attachments. Decisions that the school board and Commissioners will make at subsequent meetings are likely to have significant implications for future capital and operating budgets.

 

RECOMMENDATION (S): The Manager recommends that the boards discuss the issues noted and provide direction to staff, as appropriate.*