Buncombe County, N.C.

‘That is startling:’ Potential property tax hike coming as sales tax revenue growth slows

Buncombe County homeowners could face a property tax increase at the same time that sales tax revenues — considered a primary funding mechanism — have leveled off. When one buys goods, from clothing to a movie ticket, in North Carolina, they pay sales tax collected for the state and local municipalities like Buncombe County. But economists are seeing that consumers — in North Carolina and nationwide — are pulling back. Sales tax revenues for counties are the second largest funder for county economies.

Watchdog Over Trends

Durham County’s Budget Director Keith Lane has become a watchdog of sorts over trends with sales tax revenues for the 100 counties across North Carolina. He sends out research to budget directors across the state and has done a deep dive analysis into trends and the current leveling off. He’s concerned there’s a larger issue at play, causing what he thinks could be a permanent change in growth numbers for tax dollars counties depend on.

Concerns and Analysis

“The sales tax growth year over year for this year is as low as it’s been since 2009 or 2010,” said Lane. “That is startling. It begs the question, which I don’t have a clear answer for, what is happening?” Lane is pondering why consumers statewide are spending less. Economists point to inflation and the fact thousands of dollars in pandemic stimulus checks have dried up. There were also spikes in spending coming out of the pandemic. But Lane is diving deeper into the numbers and sees growth of sales tax revenues statewide narrowing. He said if this pattern keeps up, it will definitely impact counties that have become comfortable using sales tax revenue as the second biggest piggy bank, so to speak, to cover budget costs and increases. The biggest is property taxes.

County Revenue Trend Data

Below are sales tax revenue net numbers through March. Fiscal Year Data is courtesy of N.C. Department of Revenue.

• Buncombe County
  • 2023-2024: $147 million
  • 2022-2023: $145 million
  • 2021-2022: $133 million
  • 2020-2021: $111 million
  • 2019-2020: $109 million
  • 2018-2019: $98 million
  • 2017-2018: $90 million
• Henderson County
  • 2023-2024: $40 million
  • 2022-2023: $38 million
  • 2021-2022: $34 million
  • 2020-2021: $29 million
  • 2019-2020: $26 million
  • 2018-2019: $24 million
  • 2017-2018: $22 million
• Transylvania County
  • 2023-2024: $11 million
  • 2022-2023: $11 million
  • 2021-2022: $10 million
  • 2020-2021: $9 million
  • 2019-2020: $8 million
  • 2018-2019: $7 million
  • 2017-2018: $7 million

Expert Analysis and Economic Predictions

Mike Walden, a longtime North Carolina economics professor at North Carolina State University, doesn’t feel the leveling off of consumer spending in North Carolina is the sign of any recession. “I would reject any idea of a recession,” said Walden. “I don’t see any signs. Recession means the economy is growing at a negative rate.” Instead, Walden said he thinks inflation, the rising cost of goods and a retraction of consumerism are likely why people are pulling back.

County and City Responses

Lillian Govus, spokeswoman for Buncombe County, indicated staff aren’t as concerned as Lane is about trends in slowing sales tax revenue growth. “It is still growth,” Govus by email on Thursday. “It’s just at a slower rate than we saw pre-pandemic. While it is concerning that it’s not as high, it is a more methodical and realistic growth pattern than what we saw during peak pandemic times.” In June, Buncombe County Commissioners will consider a 5% property tax increase for residents to cover a 1% increase in the annual fiscal budget to run the county and pay staff.

Sales tax revenues, according to county charts, account for 11% of the funding for Buncombe County. City of Asheville leaders are also acknowledging a shift in the sales tax revenue trend.

Conclusion

As the county faces potential property tax hikes due to slowing sales tax revenue growth, residents are bracing for the impact on their budgets. With economic experts analyzing the root cause of this consumer spending pullback, county officials are left to navigate the challenging financial landscape to ensure essential services are maintained. The forthcoming decisions on property tax increases will undoubtedly have a significant effect on the local community, prompting a broader discussion on fiscal policies and revenue generation strategies.