North Carolina Opens Up to Local-Option Sales Taxes

New funding capacity will allow for improved transit in the Triad and Triangle Metro Areas

Several metropolitan areas in North Carolina have been toying around with the idea of implementing local sales taxes for transportation for quite a while now, after Bush-era policies made it impossible to rely on federal funds to provide the majority of funds for transit capital projects in areas without a steady tax funding source. One problem, however, was that the state has not allowed the creation of such revenue sources outside of the state’s biggest city Charlotte, which approved a 1/2¢ dedicated transit sales tax in 1998. As a result, detailed plans to improve transit in both the Raleigh/Durham Triangle and the Greensboro/Winston-Salem Triad fell by the wayside.

Over the past few years, however, advocates in both areas have been pushing forward with new proposals for transit expansion, especially after the notable success of Charlotte’s LYNX light rail system, which opened in late 2007. The Triangle has been developing an extensive 20-year plan to connect Raleigh, Cary, Durham, and Chapel Hill via electric light rail (diesel multiple unit service, the original plan, was abandoned); the project would also involve new bus rapid transit lines, a commuter rail service reaching into the region’s suburbs, and downtown streetcar circulators. The Triad’s less advanced project would connect Greensboro, Winston-Salem, and High Point with light rail. The strong effort by local officials to advance their respective projects has encouraged state legislators to pass legislation that would allow inhabitants of the two areas to increase taxes on themselves.

And indeed, yesterday, the State House passed legislation that would allow inhabitants of the counties in the Triangle and the Triad to vote to increase their sales taxes by a 1/2¢ to fund transit. Each would also be able to increase annual car registration fees from the current $5 per car to $8. The Triangle alone would gain about $90 million a year for transit this way. Other less populous counties around the state, if the measure passes the State Senate and is signed by Governor Beverly Purdue, would be able to increase their sales taxes by 1/4¢ to allow for similar improvements. Charlotte, which has its own funding problems, will not be able to increase its sales taxes any more.

For years, the Triangle and Triad have been held back from increasing their sales taxes locally by state legislators who are either to the right and didn’t want to increase taxes at all or who are to the left and didn’t want sales taxes – proportionately worse for the poor – to do the work. While I’m quite sympathetic to the argument that sales taxes are regressive, real estate interests in quickly-growing North Carolina are simply too strong politically to allow for more progressive property tax or real estate transfer tax increases. In addition, a sales tax for transit – a public service used proportionately more by those in the lower half of the economic spectrum – seems relatively reasonable.

If the State Senate moves past its previous objections, the next step in the process will require county commissions to choose to allow their respective electorates to vote in referendums as early as next year on sales tax increases. If approved by voters, final engineering on proposed lines could begin and New Start funds for the Triangle and Triad projects could be secured if they’re competitive. The earliest date for commercial service would be 2015 or so.

One problem not yet resolved is the fact that because each metro area extends across several counties, funding and planning priorities are not necessarily matching. Therefore, even if the tax resolution passes in all affected counties – three in the Triangle and two in the Triad – local authorities representing completely different interests will have to agree on which projects to prioritize. This is especially a problem in these cities, because neither region benefits from one central downtown where transit lines would coalesce. Rather, as made clear by their nicknames, both regions are polycentric. In the Triangle, we’re likely to see fighting between politicians in Raleigh and Durham; in the Triad, we’ll see conflict between Winston-Salem and Greensboro. Resolution isn’t likely to be easy.

As a native of Durham, I’m quite excited to see the state legislature finally getting its act together. If anything, Charlotte proves than North Carolinians are just as likely to use well-designed transit as people anywhere else in the country – the huge popular margin in 2007 against a proposed repeal of the sales tax in that city even before the light rail service had opened suggests that people there are very much in support of public transportation. Will the voters in the Triangle and Triad agree to increase their taxes to make a similar point? We’ll likely find out in 2010.