Agenda - 10-15-2002 - 5d - Laserfiche WebLink

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2 have come to the County from the State in the current 2002-03 fiscal year. BOCC actions included postponing capital project expenditures and freezing vacant positions. In an effort to replace the reimbursements that counties and cities have relied on for many years, the North Carolina General Assembly authorized legislation in September 2002 that allows local governments to implement Article 44 one-half cent sales and use tax. The new tax, which would not apply to food, is authorized to begin no sooner than December 1, 2002. Enactment of this tax will make North Carolina's overall sales tax rate 7 percent until July 1, 2003. At that time, a one half cent sales tax, dedicated to the State's budget, will sunset and the overall rate for North Carolina will drop to 6.5 percent. Attachments 1 and 2 of this abstract offer information provided by the North Carolina Association of County Commissioners (NCACC) regarding the additional one half cent sales tax. While there is no requirement for the Commissioners to conduct a public hearing in order to enact the new one-half cent sales tax, the Board must adopt a resolution to enact the tax. Attachment 3 provides a draft resolution for the Board to consider adopting. Upon adoption of the resolution, the County is required to give the Secretary of Revenue thirty-day notice of the tax levy. In order for the new tax to take effect by December 1, 2002, the Secretary of Revenue must receive notice of the tax levy no later than November 1, 2002. FINANCIAL IMPACT: Based on estimates supplied by the NC Association of County Commissioners, collection estimates for Orange County total $1.8 million from December 1, 2002 through June 30, 2003. The new legislation provides a "hold harmless" clause, effective July 1, 2003, to ensure that local governments do not receive less funding from the new sales tax than they normally would have received from the series of reimbursements being terminated by the State. Orange County does not expect to need "hold harmless" funding, as preliminary forecasts anticipate that receipts from Article 44 sales tax for the upcoming 2003-04 fiscal year will approach $3.8 million, compared to the approximately $3.2 million that Orange County might otherwise have received from reimbursements: Because of the tendency of sales tax revenues to increase somewhat from year to year, it is anticipated that Orange County will benefit in subsequent years from the exchange of reimbursements for Article 44 sales tax proceeds to an even greater extent than in the upcoming fiscal year. RECOMMENDATION (S): The Manager recommends that the Board of County Commissioners approve the attached resolution.