Charlotte’s proposal to scrap a $47 garbage fee in favor of a small property tax increase would help the city get more sales tax money from Mecklenburg County, city officials say.
Mecklenburg County distributes sales tax revenue based on a city’s or town’s share of the total tax bill in the county.
For instance, if a town’s property taxes are 5 percent of Mecklenburg’s total property tax bill, the town would receive 5 percent of local sales tax revenues.
If Charlotte has a higher property tax bill, it would receive more in sales tax revenues. The city estimates that converting the fee into a tax would bring Charlotte an extra $1.9 million in sales taxes from the county.
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City Manager Ron Carlee is trying to close a $21.7 million budget shortfall for the upcoming fiscal year, which begins in July.
The shortfall is created by two main factors. One is the General Assembly’s repeal of the business privilege license tax, which cost the city $18.1 million in revenue. The second is the recent property revaluation, which cost the city $14 million.
The main rationale for converting the garbage fee into a tax is that it would allow the city to get commercial property owners to help close the budget gap.
Commercial properties currently don’t pay the solid-waste fee. They do pay property taxes.
The city said that 80 percent of homeowners would pay less if the fee were changed into a tax. Property owners with homes valued at more than $313,500 would pay more.
In its presentation before City Council on Friday, the city said the existing fee is regressive in that a $1 million homeowner and a $100,000 homeowner pay the same amount.
“Most citizens would have a decrease in their overall bill,” said the city’s chief financial officer, Randy Harrington.
At the same time, however, the city may increase water rates for the people who use the least water. The city has long subsidized its so-called “Lifeline Rate” to help low-income residents get water.
It’s unclear whether council members will approve increasing the property tax rate in exchange for ending the garbage fee. Some council members objected to the idea because it would raise more revenue than before.
The garbage fee today generates about $9 million. The property tax increase would generate $13.5 million.
It’s possible the General Assembly could change how local sales tax dollars are distributed, making the city’s calculation on receiving more sales taxes a moot point.