Tax reform a reversal of fortune for city

High Point projected to see net gain from overhaul
Jul. 28, 2013 @ 06:00 AM

State lawmakers haven’t given local governments much to cheer about lately, but High Point officials are breathing a sigh of relief over one aspect of the just-concluded N.C. General Assembly session.
A state tax overhaul signed into law last week won’t result in a loss of revenue for High Point, according to estimates by the N.C. League of Municipalities. Instead, projections are that the measure should actually increase funds for city coffers.
Senate Bill 394, which was the initial tax reform proposal, was estimated to cost North Carolina’s cities and towns millions of dollars annually by repealing and cutting various local taxes.
For High Point, the measure was projected to result in the loss of $15.6 million over five years in general fund revenues, which would have put significant pressure on city leaders to cut basic services and raise property taxes.
The final legislation, which cuts personal and corporate income taxes, appears to protect municipalities from losses while generating some additional revenue.
High Point stands to gain a total of $1.64 million over the next six budget years, according to League of Municipalities calculations.
“That wasn’t what we expected at all,” said Eric Olmedo, High Point’s budget director. “A lot of the proposals got changed based on a lot of cities that went to their legislators and asked that things be changed. A lot of those original proposals were modified through the process.”
The impact of the tax overhaul punctuated budget discussions among city leaders this year.
City Manager Strib Boynton said the legislature shifted nearly $1 million in state costs to the city in the form of lost hold harmless revenues and state transit funds, as well as private business unemployment costs.
Gov. Pat McCrory and Republican legislative leaders argue that the tax package will spur economic growth by reducing taxes for individuals and businesses. The measure will expand the sales tax to some services. 
Olmedo stressed that the city hasn’t done an independent analysis of the impact from tax reform and that the League of Municipalities’ figures are preliminary and subject to change.
Still, seemingly, it’s good news for the city.
“What they’ve said all along is, there will be winners and losers within the cities,” Olmedo said. “So, based on their numbers, we apparently were one of the winners.”