Agenda 02-03-2026; 6-b - Update to Interlocal Agreements between County and Towns on Tax Collection

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2 The Tax Office proposes the following plan to the realize the revenue originally envisioned by the annual software surcharge: 1) Meet with the towns staffs to discuss the current ILA and potential actions to meet the County's costs related to billing and collecting taxes for the towns. 2) Discussion would include the possibility of an amendment to the current ILA to for a proposed increase of the fee as of July 1, 2026 and the possibility of replacing the current joint ILA with separate ILAs that follow a shorter expiration schedule. The County separately has agreements with the cities of Durham and Mebane that are both scheduled to expire on June 30, 2026. The Tax Office proposes to initiate discussions with both jurisdictions to address the pending expirations and also in order to potentially standardize the fee schedule and expiration schedule between all of the municipal collection ILAs. The Tax Assessment Work Group has issued a request for proposals (RFP) to retain a consultant to make recommendations on enhancements to the Assessment Division of the Tax Office. These enhancements will be targeted to ensure a more equitable and better communicated revaluation in 2029. The County will be able to utilize additional municipal funding to fund the recommendations made by the consultant and other tax office divisions enhancements. FINANCIAL IMPACT: There would be an increase in revenue generated from the proposed amendment to the current ILA. The revenue accrued through the new ILAs could be used to fund recommended improvements to the Tax Office beginning in FY 2026-27. The County received $410,000 in FY 2024-2025 from the Towns based on a 0.5% tax collection fee. ALIGNMENT WITH STRATEGIC PLAN: This item supports: • GOAL 6: DIVERSE AND VIBRANT ECONOMY OBJECTIVE 3. Streamline and improve County administrative processes to facilitate efficient and effective interactions between residents, businesses, and County departments. OBJECTIVE 5. Increase access to and awareness of information and assistance available to residents and businesses through clear communication and responsive service delivery. RECOMMENDATION(S): The Manager recommends that the Board: 1) receive the information regarding the current interlocal agreement (ILA) between Orange County, Chapel Hill, Carrboro and Hillsborough for municipal tax collection; 2) authorize the Tax Administrator and Budget Director to begin discussions with Chapel Hill, Carrboro and Hillsborough on the current ILA and potential actions to meet the County's costs related to billing and collecting taxes for the municipalities. The discussions would include: o the possibility of an amendment to the current ILA for a proposed increase of the fee as of July 1, 2026; and o the possibility of replacing the current joint ILA with separate ILAs that follow a shorter expiration schedule; 3) direct the Tax Office and Budget Director to report back to the Board after discussions with the three towns; and 4) authorize the Tax Administrator and Budget Director to initiate discussions with the cities of Durham and Mebane, and with the pending expiration of those respective agreements, direct staff to present the Board with proposed amendments extending the agreements or with new ILAs with the two jurisdictions.