Sales Tax Revenue Up In OC – But Why?

Orange County is one of the richest counties in North Carolina in terms of per capita income, but we perennially rank near the bottom when it comes to retail sales and sales tax revenue.

But there are some indications that this may be starting to change: “Our taxable sales are now $1.47 billion,” said Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, during his annual “State of the Community” report Thursday at the Friday Center.

View the full report here.

According to numbers from the state Department of Revenue, taxable sales in Orange County topped a billion dollars for the first time in fiscal year 2011 and have risen steadily since – topping $1.4 billion in fiscal year 2014 and reaching nearly $1.5 billion in the last fiscal year. That led to a spike in sales tax revenue – breaking $70 million in the last fiscal year for the first time ever, up from just over $50 million three years ago.

That’s a big shift. In 2012, despite being no. 2 in the state in per capita income, Orange County ranked 81st in per capita sales tax revenue. But in 2013, just a year later, Orange County ranked 42nd – moving past Wake, Alamance, and Chatham in the process.

“So around our office there were double-high fives, there was chest bumping – it was really exciting,” Nelson said.

But he says that number is a bit deceiving – because it’s not all about greater retail sales. “The revenue went up because we added a half-cent tax and a quarter-cent tax,” he said – and those tax increases added to the spike, along with the actual increase in sales. (Together, Orange County collected about $9.2 million from the half-cent and quarter-cent taxes in fiscal year 2015 – accounting for a little less than half of the $20 million increase in revenue from fiscal year 2012.)

Still, Nelson says the change is a promising sign that Orange County is making progress on an issue that’s troubled local policymakers and business leaders for many years – even if the issue still remains.

We’ll have many more numbers from Nelson’s State of the Community address on WCHL and in the coming days.

Chamber: Orange County Tax Base Falling Into “Retail Gap”

Aaron Nelson and Chamber board chair Paige Zinn at the State of the Community meeting. Photo by Donn Young, courtesy Orange County Visitors Bureau.

CHAPEL HILL – Orange County is the wealthiest county in the state of North Carolina—but the steady flow of money outside county lines continues to be a cause for concern.

“Per capita income is the highest (and) unemployment is the lowest in the state, but we still have this huge retail gap,” said Aaron Nelson, president of the Chapel Hill-Carrboro Chamber of Commerce, presenting data Tuesday at his annual State of the Community report.

The “retail gap” refers to the difference between the amount of money spent by Orange County residents each year and the amount of money that’s actually spent in Orange County.

According to the state Department of Commerce, Orange County residents spent about $1.68 billion dollars last year alone—but retail sales in Orange County were less than $1 billion.

“The gap in Orange County is $728 million” in 2012, says Nelson. “Making gains on this will have (a) huge impact.”

That $728 million gap is nearly twice that of Durham County ($376 million) and more than three times the retail gap of Chatham County ($236 million). And Alamance County—thanks in part to Tanger Outlets—actually has a $154 million retail surplus. Nelson says that gap helps explain why Orange County—number one in the state in per capita income—ranks only 65th in terms of sales tax revenue.

And he says eliminating that gap—or at least reducing it—will go a long way toward easing the tax burden on local property owners. About 87 percent of Orange County’s taxable land is residential property (compared to just 60 percent in Durham), which means the county’s property tax burden will always fall most heavily on homeowners. Nelson says that number’s not going to change—so the key is to generate more sales tax revenue from the commercial property we have, so as to be less reliant on property taxes as a whole.

“We should stop focusing on (and) beating ourselves about that split between residential and commercial,” he says. “We need to use that to remind ourselves (that) we’ve got to grow revenue from commercial sources.”

And Nelson also says Orange County can ease its burden by taking steps to reduce “wealth migration,” the amount of income that leaves the county whenever people move. Not surprisingly, Orange County draws in wealth from all over the country—but when it comes to our neighboring counties, there’s a lot more money leaving Orange County than coming in.

“The biggest outflow is $179 million worth of wealth…moving to Chatham County,” says Nelson. “The second highest amount was to Alamance County, $86 million, (and) Durham County, $83 million…Wealth migration has had a negative impact on Orange County, but a positive impact on our neighbors.”

Those numbers cover the period from 1992-2010; in that span, Orange County suffered a net wealth-migration loss of nearly $50 million in gross income. (All of that loss came in the last nine years; until 2001 Orange County was gaining more than it was losing.)

Nelson delivered his State of the Community report on Tuesday at the Friday Center. You can see the full presentation at this link.

The 1/4 Cent Sales Tax

When Orange County created its Economic Development Districts in the early 1990’s, the purpose was to designate non-residential zones that would serve “for the next fifty years.” The districts were created along interstate highways to benefit from obvious transportation advantages. Orange County, with its support for quality education and environmental awareness, provides a great place for employers and employees to live and work. However, nearly twenty years later, virtually no activity has occurred in the Economic Development Districts.

Therefore, the Board of Commissioners has recently begun to modify policies to better support business growth – both new and existing – in the county. We have adopted a Unified Development Ordinance (UDO) and are in the process of amending regulations to make Orange County more competitive. We’ve revised Land Use designations. We’ve zoned property for business use and we’ve provided incentives to support expansion of an existing business.

The primary reason for the lack of activity, however, has been the lack of necessary infrastructure – water and sewer – that companies require for any site to make the first cut as a viable location. Investment now in water and sewer lines in the Economic Development Districts will make us competitive in the global business market, and will pay dividends in new taxable property, new sales tax revenue, and most importantly, in new opportunities to work and shop in Orange County.

We have the will, and with the approval by the voters of the ¼-cent local sales tax, we will have the means. Please come out to vote on November 8, and please vote “FOR” the ¼-cent tax.

Steve F. Yuhasz
Vice-Chair, Orange County Board of Commissioners