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This advantage is the fact that the "Real Cost"of the Land Transfer Tax can be less than
<br /> the "Actual Cost" because the property owner will have had use of this money over the period of
<br /> time he, or she, has owned the property. Therefore, this money can be invested, in an interest
<br /> bearing account for example, which when compounded over the period of time of ownership,
<br /> will reduce the "Real Cost" of the transfer tax at the time of sale. With the Sales Tax option, or
<br /> the increase in Property Tax option, the money is paid out on an ongoing base and there is no
<br /> opportunity for the property owner to put this tax money to work for him.
<br /> Example:
<br /> The attached example shows one way that a property owner might use this advantage.
<br /> First let's define "Real Cost." The "Real Cost" of money is the total cost of the money used to
<br /> pay for a given expense. The "Actual Cost" is the amount of money paid when the payment is
<br /> due. Let's assume that a person buys property in Orange County for$130,000.00. They own
<br /> the property for 20 years, and then sell the property, which has appreciated at a rate of
<br /> approximately 4.3% per year, and is sold for $300,000. The Seller would pay a "Transfer Tax"
<br /> of 0.4% ($1200.00), when the property is sold, which I am calling the "Actual Cost."
<br /> During the 20-year period that the Seller owned the property, he did not have to pay any
<br /> portion of"Transfer Tax," and if he wished, he could save $60 per year, for a total of$1200, in
<br /> an interest bearing investment. If the seller invested $60 per year over the 20-year period,
<br /> earning 4.0% per year, the value of the investment after 20 years would be approximately
<br /> $1858.00. Therefore, after paying the $1200.00 transfer tax when the home is sold, the seller
<br /> would have a surplus of approximately $658.00. Therefore, the `Real Cost" of the "Transfer
<br /> Tax" to this Seller would be $541.000 ($1200.00 - $658.00 = $541.00), not the "actual cost" of
<br /> $1200.
<br /> One might suggest that, not everyone would invest the money in this way over the 20-
<br /> year period, or have the means to do so. Another option that the Seller would have, since he
<br /> has the use of this money over this 20-year period, would be to invest this$1200.00 to enhance
<br /> the appearance and marketability of the property by investing in painting, landscaping, new
<br /> appliances, or other improvements which may be needed, resulting in yielding a higher selling
<br /> price for the property, and thereby recovering the transfer tax cost at the time of sale.
<br /> Thank you for your time and consideration of this input."
<br /> Ryan Miller said that he was born and raised in Orange County and is an Orange County
<br /> educator, landowner, and part-time farmer. He said that he understands the need for a revenue
<br /> stream, but he would prefer no new tax at all. He does not support the prospect of a land
<br /> transfer tax. He said that he would support a sales tax to share the burden with all citizens.
<br /> Non-residents that purchase taxable goods from the current and future stores in Orange County
<br /> would also pay the sales tax. He said that he is also here tonight as the Cedar Grove Ruritan
<br /> Club President. He said that the topic of the local revenue options is one of concern for the
<br /> Cedar Grove Ruritan Club and community. He said that his club decided to facilitate a petition
<br /> against the land transfer tax. He read it: "We, the undersigned residents and/or property owners
<br /> in Orange County hereby express our serious concerns relative to the outrageously high
<br /> property taxes in Orange County. We understand that to increase County revenues, there is a
<br /> proposed land transfer tax. This is our opinion, that the land transfer tax is unfair in that only a
<br /> small minority of residents, some being elderly, farmers, non-profits and others that might be
<br /> forced to sell property to meet their needs. These people would have to pay this tax to benefit
<br /> the majority, which would not be effective. We vigorously oppose such a tax and petition the
<br /> Orange County Commissioners to dismiss this proposal." He said that in ten days they were
<br /> able to get 1,567 signatures. He gave this petition to the Clerk.
<br /> Bill Olsen thanked the County Commissioners for their deliberations. He said that he
<br /> has a background in Chapel Hill and has worked here for 50 years in real estate business. He
<br /> said that he attended a meeting recently and made a point about the land transfer tax. He
<br /> spoke about usable/livable housing for seniors, which would be smaller one-story houses. He
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