Politics & Government

Beach towns worry NC Senate plan could stop ‘sand tax’

Four North Carolina beach towns are concerned that a Senate budget provision could put the fate of their “sand tax” districts in the hands of a few voters.

The beach leaders are joining other city downtown development groups in opposing the Senate’s plan for municipal service districts, which add an extra property tax for certain areas of a town.

Sen. Trudy Wade, a Greensboro Republican, has inserted language in the Senate budget bill that would allow registered voters to petition for a ballot referendum on eliminating the taxes. The provision went largely unnoticed as the Senate debated and approved its 500-page spending plan last month.

Wade said the move would empower residents looking to dismantle a Greensboro historic neighborhood’s tax district. Currently, only a city or town council can end the taxes through a majority vote.

Greensboro is the only city in the state that uses the service district tax to raise money that is used for sprucing up historic neighborhoods. Nearly all of the other 53 municipalities with municipal service districts use them to fund downtown development.

The main exceptions are the four coastal towns that fund beach renourishment projects through tax districts. Carteret County, Emerald Isle, Pine Knoll Shores and Indian Beach all have tax districts to pay for putting more sand on the beaches. So does Bald Head Island in Brunswick County.

The tax districts mean owners of beachfront property pay more “sand taxes” than their neighbors a few rows back.

“The purpose … is those that are benefiting the most should pay more for that particular service,” Bald Head Island village manager Calvin Peck said. “That service is protection from erosion.”

Under Wade’s plan, only voters registered within the tax district could vote in a referendum. So beach property owners whose primary home is elsewhere would be shut out of the process.

Bald Head, for example, has 2,000 properties but only 200 registered voters. That typically means limited participation in village elections.

“We already struggle with that,” Peck said. “I think this would only make it worse.”

Further reducing potential participation, each of the four beach towns has two municipal service districts: one for beachfront property, and one for property that doesn’t border the ocean. Each district would be subject to a separate petition and referendum process under the Senate’s budget bill.

At Pine Knoll Shores, the special tax is an additional 6 cents per $100 in valuation for property on the first row and an extra 1.6 cents for everyone else.

That means a $500,000 home’s owner in the first row pays $300 a year more, and it pays for sand. A home with the same value a few rows back has an extra tax bill of $80.

“That’s a point of contention,” Pine Knoll Shores Town Manager Brian Kramer said.

If residents killed a municipal service district through a referendum, beach towns either could raise the overall property tax rate or use a special tax assessment on specific properties closest to a sand project.

The latter approach isn’t desirable because it wouldn’t allow for tax deductions, Peck said. “At least with property tax, you get the opportunity to write that off on state and federal income tax,” he said.

Wade has said she intended for the budget provision to target neighborhood service districts such as the ones in Greensboro. She said she’s not looking to end other types of tax districts.

But as news of the legislation has spread, the conservative group Americans For Prosperity began lobbying for it on social media. AFP’s North Carolina director, Donald Bryson, said a referendum process is a good idea for all tax districts – including the ones in downtowns and beach areas.

“I think anytime more of the power of taxation goes to the people through a democratic process, that’s a good thing,” Bryson said.

Bryson said coastal towns should spread their tax burdens evenly and cover beach renourishment out of the general fund budget. “With coastal towns, the bread and butter of their economy is the beach itself,” he said.

But Kramer said the separate tax ensures Pine Knoll Shores’ sand fund won’t get raided for other budget needs. The fund receives about $316,000 a year and is intended to fill up by 2022, when projections indicate the next round of new sand will be needed to stave off erosion.

He said he’s confident town residents will support the sand tax even if Wade’s proposal becomes law. “I don’t believe we’d fail a referendum, because there’s an appreciation of the need to pay for beach renourishment,” he said.

Campbell: 919-829-4698;

Twitter: @RaleighReporter

Municipal service districts

Towns and cities across the state have used a law allowing “municipal service districts” to create three types of special property taxes:

Downtown development tax: Nearly 50 municipalities charge an additional property tax in their downtown areas to fund development activities, such as events, marketing and sidewalks.

Sand tax: Four coastal towns have an additional property tax to pay for beach renourishment. The districts allow them to keep the sand funding separate while charging oceanfront property owners more.

Neighborhood tax: The least-common form of municipal service district is used in two Greensboro historic neighborhoods. The tax funds landscaping, street lamps and other projects – much like a homeowners association.