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or Truth 
The John Locke Foundation
is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.
200 W. Morgan, #200Raleigh, NC 27601
phone:
919-828-3876
fax:
919-821-5117www.johnlocke.org
regional
brief 
Does Polk Need a Land-Transfer Tax Increase?
County already has over $11 million in available funds
D
r
. M
ichael
S
 anera 
, J
oSeph
c
oletti
, t
erry
S
toopS
O
ctOber
2008
No. 65
e
xecutive
S
uMMary
The Polk County commissioners are asking county residents toapprove a land-transfer tax increase on November 4. County com-missioners have committed 100 percent of the land-transfer taxrevenue to farmland preservation. This commitment is meaning-less, however, because by law land-transfer tax revenues can be usedfor any legal purpose, and this or a subsequent county commissioncould divert those funds to other purposes, including the generalfund.Farmland preservation would be accomplished by buying develop-ment rights from farmers. Once purchased, farmland would be per-manently locked up, depriving the county of any future increasesin the tax base. In addition, a reduction in the amount of buildableland would cause the price of the remaining land to skyrocket, mak-ing many current county landowners very rich.This
 Regional Brief 
nds that Polk County’s problems are not cre
-ated by a lack of funding. The more than $11 million in savings
and revenues identied in this report is almost 12 times the amount
that the proposed land-transfer tax increase is estimated to produce(see Figure 1). If the county used this money instead, it could delay
•••
The authors thank John Locke Foundation research intern Clint Atkins for his assistance with this report.
 
does Polk county need a land-transfer tax increase?regional brief
Figure 1. Polk County Projected Revenue and Savings
a land-transfer tax increase for nearly 12
 years.
Polk County’s cash reserves are nearly 37
percent of its annual budget. The staterequires all counties to have eight percentof their budgets held in cash for emergen-
cies, but Polk County has almost 29 percent
more than that minimum. This means
that the county has almost $5.7 million in
cash that it can spend on pressing needs.
This gure represents nearly six times the
amount that the proposed land-transfertax would raise. In other words, the countycould use this available cash for the nextsix years instead of new land-transfer taxrevenue, which is estimated to be worth
only about $953,000 per year. Based on
this item alone, the county does not need toincrease the land-transfer tax.
County revenues have grown 30 percentfaster than population and ination sinceFiscal Year (FY) 2002 (see Figure 2). Thetotal amount of revenue for FY 2007 wasalmost $4.6 million more than in FY 2002.By FY 2007, the average family of fourpaid $964 more in taxes than in FY 2002.
It would take a 48 percent increase in fam-ily income (current dollars) to match theincrease in revenues that the county has
received over those ve years.
••
If Polk County were to restrict its revenueincreases to the increases in population
and ination, the county’s revenues would
increase 40 percent over the next ten years.Over the next ten years, the number of students in Polk County public schools will
decrease
by 279 students or by almost 12
percent.If the school district has facility needs, thecounty commission and school board needto show taxpayers how they would spend
the $3.5 million in state money provided
for capital improvements over the next ten years.
Polk County beneted from the Medic
-
aid swap above the state’s promised “hold
harmless” amount of $500,000 a year forten years. Polk County receives an averageof $540,000 per year for the next ten years(see Figure 1).
B
 ackgrounD
In its 2007 session, the North Carolina Gen
-eral Assembly relieved all counties of paying 
the portion of Medicaid expenses that had
been forced on counties, in exchange for thehalf-cent sales tax that the counties leviedto help pay those expenses.
1
In addition, thelegislature voted to give counties the option
••••
Revenue Gains1 year10 years
Gain from Medicaid swap (FY 2008-09)$500,000$5,427,597Estimated school capital (Avg based on projections)
$394,415$3,481,501
Revenue Growth
Revenue in excess of population and inflation (FY 2007)$4,592,328$45,923,276
TOTAL$5,486,743$54,832,374Fund balance in excess of state requirement (FY 2007)$5,691,915$56,919,150
Potential extra availability$11,178,658 $111,751,524Revenue from Land Transfer Tax Increase$952,656 $12,047,961
 
 
John locke foundationdoes Polk county need a land-transfer tax increase?
to ask voters to approve new tax increases.Options include increasing the sales tax byone-quarter cent, tripling the land-transfer
tax rate from 0.2 to 0.6 percent, or not hiking 
taxes at all.The legislature also required counties toput those tax increases to an advisory vote of the people. If voters approved, county com-missioners were allowed but not requiredto increase taxes. If both tax increases wereon the same ballot and both were approved,commissioners could impose only one taxincrease, not both.
Since November 2007, county voters
across North Carolina have voted 58 timeson such tax increases, rejecting nearly all of them. Voters have approved only eight of those 58 proposed tax increases. Undeterredby voter opposition, some county commis-sions have put the tax increases on the ballotmore than once.There is no limit to the number of timesthat county commissioners can place aproposed tax increase on the ballot, or howmuch tax money commissions can spend on
public “education” campaigns requesting 
that voters approve the tax increase.
p
uBlic
S
chool
S
penDing
2
By far, counties spend more money on public
education than any other area. Total localgovernment spending on public education
was $2.68 billion or $1,934 per pupil for the2006-07 school year. Nearly 25 percent of all
expenditures on public schools come from
local tax revenue. Given the amount of tax
-payer money involved, sympathetic appealsfor school funding should not come at the
expense of sound scal policy
County governments and school boardsshould spend local tax dollars for education,as well as hire public school personnel, inproportion to changes in their school popu-
lation. In Polk County, from 2002 to 2007,
there was a ten percent increase in student
population. At the same time, there was a 17percent increase in local, ination-adjusted
per-pupil expenditures.
Over the last ve years, the state in
-creased per-pupil expenditures in Polk 
Figure 2. Polk County Locally Generated Revenue Per Person,
FY 2002–FY 2007 (adjusted for ination, FY 2006 dollars)
$1,045$804
$500$600$700$800$900$1,000$1,100200720062005200420032002
Fiscal Year 
 
Source: State Treasurer's Office
Amount actually collectedGrowth pays for itself 
30%
(2006 $)
of 00

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