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Regional Brief 81 Durham’s Tale of Two Tax Increases: County seeks $26.5 million’s worth of sales-tax hikes for schools and transit

Regional Brief 81 Durham’s Tale of Two Tax Increases: County seeks $26.5 million’s worth of sales-tax hikes for schools and transit

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Key facts:
• Durham County commissioners are asking voters to approve two sales-tax increases on November 8. The requested increases would amount to $26.5 million per year.
• Commissioners promise voters that revenue from the proposed quarter-cent sales-tax increase would be used for schools, but there is no legal basis for that promise, so the approximately $9.2 million per year could be used for any legal purpose.
• Commissioners are also asking voters to approve a half-cent sales-tax increase for public transit. Under state law, the tax proceeds may be spent only for the benefit of Durham County. Both the “Durham County Bus and Rail Investment Plan” and Durham County referendum materials indicate that the plan is specifically designed to “enhance regional transit.” Spending from this tax increase would benefit Orange County and Wake County also, not just Durham County.
• The estimated $17.3 million in new revenue from the half-cent sales-tax increase would more than double the county’s current spending on transit.
• Currently, taxpayers pay about $4.50 for each round trip on Durham’s buses.
• If Charlotte’s light-rail system is any measure, and the proposed Triangle rail system becomes reality, the taxpayer subsidy could be about $40.30 for each round trip.
• The proposed Triangle rail system would not solve the Triangle’s traffic congestion and pollution problems because hardly anyone would ride its trains. Of 22 major U.S. cities with rail transit, only one carries more than 3 percent of all the motorized passenger travel, and 16 of those 22 carry less than 1 percent.
• Durham’s spending and revenues have grown faster than population and inflation over the last five years.
• Between 2004 and 2010, Durham County has spent more per-pupil dollars on K-12 public education than nearly any other school district in the state.
• Between 2004 and 2010, Durham Public Schools spent an average of $1,072 more per student than the state average expenditure.
• Despite spending more than the state average, Durham Public Schools have a below-average return on educational investment. Durham’s taxpayers are not getting their tax money’s worth out of the school system.
Key facts:
• Durham County commissioners are asking voters to approve two sales-tax increases on November 8. The requested increases would amount to $26.5 million per year.
• Commissioners promise voters that revenue from the proposed quarter-cent sales-tax increase would be used for schools, but there is no legal basis for that promise, so the approximately $9.2 million per year could be used for any legal purpose.
• Commissioners are also asking voters to approve a half-cent sales-tax increase for public transit. Under state law, the tax proceeds may be spent only for the benefit of Durham County. Both the “Durham County Bus and Rail Investment Plan” and Durham County referendum materials indicate that the plan is specifically designed to “enhance regional transit.” Spending from this tax increase would benefit Orange County and Wake County also, not just Durham County.
• The estimated $17.3 million in new revenue from the half-cent sales-tax increase would more than double the county’s current spending on transit.
• Currently, taxpayers pay about $4.50 for each round trip on Durham’s buses.
• If Charlotte’s light-rail system is any measure, and the proposed Triangle rail system becomes reality, the taxpayer subsidy could be about $40.30 for each round trip.
• The proposed Triangle rail system would not solve the Triangle’s traffic congestion and pollution problems because hardly anyone would ride its trains. Of 22 major U.S. cities with rail transit, only one carries more than 3 percent of all the motorized passenger travel, and 16 of those 22 carry less than 1 percent.
• Durham’s spending and revenues have grown faster than population and inflation over the last five years.
• Between 2004 and 2010, Durham County has spent more per-pupil dollars on K-12 public education than nearly any other school district in the state.
• Between 2004 and 2010, Durham Public Schools spent an average of $1,072 more per student than the state average expenditure.
• Despite spending more than the state average, Durham Public Schools have a below-average return on educational investment. Durham’s taxpayers are not getting their tax money’s worth out of the school system.

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Published by: John Locke Foundation on Oct 19, 2011
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The John Locke Foundation
is a501(c)(3) nonproft, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyreect 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 
Durham’s Tale of Two Tax Increases
County seeks $26.5 million’s worth of sales-tax hikes for schools and transit 
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Durham County commissioners are asking voters to approve twosales-tax increases on November 8. The requested increases wouldamount to $26.5 million per year.
•
Commissioners promise voters that revenue from the proposed quar-ter-cent sales-tax increase would be used for schools, but there is nolegal basis for that promise, so the approximately $9.2 million per yearcould be used for any legal purpose.
•
Commissioners are also asking voters to approve a half-cent sales-taxincrease for public transit. Under state law, the tax proceeds may bespent only for the benet of Durham County. Both the “DurhamCounty Bus and Rail Investment Plan” and Durham County ref-erendum materials indicate that the plan is specically designed to“enhance regional transit.” Spending from this tax increase wouldbenet Orange County and Wake County also, not just DurhamCounty.
•
The estimated $17.3 million in new revenue from the half-cent sales-tax increase would more than double the county’s current spending on transit.
•
Currently, taxpayers pay about $4.50 for each round trip on Dur-ham’s buses.
•
If Charlotte’s light-rail system is any measure, and the proposed Tri-angle rail system becomes reality, the taxpayer subsidy could be about$40.30 for each round trip.
 
2
John locke foundationdurham’s tale of two tax increases
•
The proposed Triangle rail system would notsolve the Triangle’s trafc congestion and pol-lution problems because hardly anyone wouldride its trains. Of 22 major U.S. cities with railtransit, only one carries more than 3 percentof all the motorized passenger travel, and 16of those 22 carry less than 1 percent.
•
Durham’s spending and revenues have grownfaster than population and ination over thelast ve years.
•
Between 2004 and 2010, Durham County hasspent more per-pupil dollars on K-12 publiceducation than nearly any other school dis-trict in the state.
•
Between 2004 and 2010, Durham PublicSchools spent an average of $1,072 more perstudent than the state average expenditure.
•
Despite spending more than the state average,Durham Public Schools have a below-averagereturn on educational investment. Durham’staxpayers are not getting their tax money’sworth out of the school system.
i
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Durham County commissioners are ask-ing voters to approve two sales-tax increaseson November 8. The requested increaseswould amount to $26.5 million per year innew tax revenues. This request comes amidnews that state unemployment has been above9 percent since January 2009 and is currently10.4 percent.
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One of the tax increases that county com-missioners are seeking is a quarter-cent sales-tax increase ostensibly for public schools.Commissioners claim that Durham PublicSchools would receive most of the $9.2 mil-lion in estimated new revenue from this taxincrease.
1
Taxpayers have no legal guaranteethat the money would be spent for that pur-pose, however. According to state law, the rev-enue could be used for any legal purpose. Fur-thermore, commissioners and school boardmembers have not made a case for additionalfunding, nor — as demonstrated below — isadditional funding even necessary.Between 2004 and 2010, Durham Countyhas spent more per-pupil dollars on K-12public education than nearly every otherschool district in North Carolina (see the tablebelow).
2
The local per-pupil expenditure neverfell below the seventh highest in the state. Dur-ham County spent an average of $1,065 perpupil higher than the state average during thisperiod. Simply put, Durham taxpayers con-tinue to provide ample resources to the publicschools in the county. Although Durham’s total (state, local,and federal) per-pupil expenditure ranking dropped from 29th to 39th highest last year,the district still spends over $1,000 more perstudent than the state average. Between 2004and 2010, Durham Public Schools spent an
Per-Pupil Expenditures, Durham County vs. North Carolina Average, 2004–10
3
YearGradu-ationRate
4
 
 Local Per-Pupil Expenditures OnlyTotal State, Local, & Federal Per-Pupil Expenditures
DurhamCo. PublicSchoolsState AverageDifferenceDurhamRank DurhamCo. PublicSchoolsState AverageDifferenceDurhamRank 201069.8%$2,914.20$1,930.62+$983.586 of 115$9,454.01$8,451.43+$1,002.5839 of 115200964.0 %$3,446.98$2,123.31+$1,323.677 of 115$10,000.73$8,662.88+$1,337.8529 of 115200862.9%$3,176.29$2,075.15+$1,101.147 of 115$9,700.45$8,521.66+$1,178.7931 of 115200766.3%$2,976.44$1,934.05+$1,042.396 of 115$9,040.54$8,017.42+$1,023.1232 of 115200668.8%$2,840.10$1,873.14+$966.965 of 115$8,570.16$7,596.15+$974.0132 of 115200557.6%
5
$2,840.74$1,811.66+$1,029.085 of 115$8,415.06$7,327.60+$1,087.4629 of 115200458.5%
6
$2,725.16$1,716.94+$1,008.226 of 115$7,911.87$7,006.13+$905.7431 of 115
 
3
durham’s tale of two tax increasesregional brief
average of $1,072 more per student than thestate average expenditure. In general, reces-sionary decreases in state and federal tax rev-enues, not local effort, were responsible for thelower ranking.Despite this above-average revenue stream,the district schools have produced mixedresults. After three years of decline, four-yeargraduation rates are on the rise. Moreover, a2011 study of educational productivity con-ducted by the Center for American Progress,a liberal think tank based in Washington,D.C., indicated that Durham Public Schoolshave a below-average return on investment(ROI).
7
Durham taxpayers should considerthe district’s use of resources before they voteto increase them.
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Commissioners are also asking voters toapprove a half-cent sales-tax increase to fundtransit improvements.
8
Collection of the taxescould begin as early as April 2012.
9
Accord-ing to the educational materials on the transitsales tax
10
and the “Durham County Bus andRail Investment Plan,”
11
the new tax revenuewould be used to subsidize regional bus, com-muter rail, and light rail. The funds from thetax would be used to “enhance
regional 
tran-sit.”
12
(emphasis added). Within the rst 12–18 months, the bus ser- vice is expected to provide new connectionsfrom Durham County to Raleigh, RTP, andChapel Hill. The new light-rail service wouldbe a 17-mile corridor between Durham andOrange counties. The new commuter railsystem would be a 37-mile corridor betweenDurham and Wake counties. When or even if rail construction would begin in Orange and Wake counties is unclear, however.This entire plan could lead to illegalspending of Durham County funds for thebenet of outside counties. Under state law,the proceeds of the transit tax “may be usedonly for the benet of the special district.”
13
Inthis instance, the Triangle Transit Authority(TTA) designated Durham County as the spe-cial district. Therefore, all proceeds may beused only for the benet of Durham County. As its own promotional material explains,revenue from the tax increase would be usedto serve
regional 
transportation needs. Thebuses would physically run outside DurhamCounty. The rail lines could also run outsideDurham County. At a minimum, the rail linesare being built with an eye towards creating rail systems that would serve those in othercounties besides Durham County.Looking at the plain language of the law,if funds benet any entity besides the specialdistrict, it likely would be an improper use of the funds.Beyond the question of whether the use of the funds would be legal, the fact of the mat-ter is that Durham County residents are being asked to support a signicant tax increase fora plan that is speculative at best. DurhamCounty commissioners are selling the taxincrease on the benet of a regional transitplan, but neither Orange County nor WakeCounty have asked to be part of the specialdistrict. As a result, residents from those coun-ties would not be subject to additional taxes tosubsidize regional transit.In other words, were the tax increase topass, it is very possible, especially in these dif-cult economic times, that Durham Countyresidents would pay for regional transit ontheir own, without the assistance of Orangeand Wake counties.Durham County argues that if those othercounties do not approve a sales tax, adjust-ments can be made to the plan.
14
That wouldbe little comfort, however, were the sales taxstill collected locally but the money spenton projects that were always designed to beregional. Adding to the speculative nature of thetax, the “Durham County Bus and Rail Invest-ment Plan” also notes that the overall TriangleTransit Plan would be dependent upon stateand federal funding of rail capital costs — 25percent from the state and 50 percent fromthe federal government.
15
Durham Countyresidents are at risk of voting themselves a

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