Charlotte toys with higher taxes for transit — but two hurdles stand in the way
Charlotte leaders again are considering a sales tax increase to fund new rail lines and bus routes, but disagreement among council members could hold the plan back another year.
No decisions were made at the Charlotte City Council’s two-day retreat after a lengthy discussion, but members talked openly about a penny sales tax increase that would subsidize rail projects and qualify the city for federal funding matches. The council also must get legislative approval before holding a referendum for the tax increase, and some Republicans in Raleigh have opposed Charlotte’s transit plan.
The Charlotte Area Transit System has relied on a half-cent transit tax to fund itself for more than two decades. Increasing that tax to one penny, or 1%, would transform Charlotte’s transportation system, some officials say.
“The time is now to capitalize on this once in a generation investment in federal transportation funding,” said Amanda Vandegrift, managing principal at InfraStrategies LLC, a consulting company hired by the city. Vandegrift specializes in multi-billion dollar financial plans and oversees several national transportation providers.
The sales tax increase is the most viable option for Charlotte as a local funding option for its transportation plan, Vandegrift said, because it has a high revenue potential and it captures funds from visitors and residents.
Sales tax is paid by consumers when purchasing goods and services. It’s also one of the top revenue sources for the city’s budget. In 2022, sales and property taxes made up 70.6% of Charlotte’s general fund, according to the city’s annual financial report.
Another option is raising property tax rates, but it would cost the average Charlotte household more than a sales tax increase, Vandegrift said.
Vandegrift said cities like Austin, Dallas, Houston and Denver are ahead of Charlotte in generating revenue for transit services.
“They’re leveraging dollars from the federal government and they’re able to pull that into the region. Charlotte needs local funding to do the same,” Vandegrift said.
A plan to add an east-west light rail line, expand the bus network and build on existing cyclist and pedestrian infrastructure is necessary for the 21,600 Charlotte households that do not own a car, Charlotte Deputy Transportation Director Ed McKinney told the council.
“We’ve built a road infrastructure that they simply can’t use,” McKinney said.
What’s holding up the sales tax increase?
Charlotte City Council members disagree on logistics of how to lobby voters and the state legislature for a sales tax increase.
The council also is behind schedule if members want this passed in November. There is no deadline for ballot measures like referendums in Mecklenburg County, said Kristin Mavromathis with the Mecklenburg Board of Elections, but local governments are encouraged to file by July in time for early voting.
Council members also face opposition from legislative leaders. Earlier this month, North Carolina Republican House Speaker Tim Moore blasted the city’s transit plan, saying it needed to focus more on roads and less on public transit and bike lanes, WFAE reported.
“If we ask tomorrow for it, it’s not likely that we get it on the November ballot,” Mayor Pro Tem Braxton Winston said. “What we need legislatively is a funding source for a community-driven and council-adopted mobility plan.”
Winston and at-large Councilwoman Dimple Ajmera both vocalized support for the tax increase.
“It puts less burden on our residents,” said Ajmera, who chairs the city’s intergovernmental relations committee. “There’s steady growth rate as opposed to the property tax (increase option).”
The idea dissolved into bickering when it came time to vote on council’s intention to move forward on the sales tax increase. Council members Monday continued to disagree over wording, talking over each other until Mayor Vi Lyles tabled the discussion.
“How are we going to develop a message for the benefit of the community that makes clear where we’re going?” District 7 Councilman Ed Driggs said.
Ajmera plans to lead a conversation on how the council plans to move forward with its intent for a transit tax at the next intergovernmental relations committee meeting planned for noon Monday.
This story was originally published February 1, 2023 at 6:00 AM.
