Local Revenue Concerns

The primary revenue sources for local governments in North Carolina are the property tax and the local portion (2.5 percent) of the retail sales tax.  The more important of these two is the property tax, which by national standards is low in North Carolina. 

The shrinking sales tax base is a problem for local governments just as it is for state government. The other challenge is that property tax revenues tend not to keep up with growing needs. These problems take different forms in urban and rural counties.

The consequence for rural, low-wealth counties is that existing revenues are not able to cover the county share of education.  The consequence for urban, wealthier counties is that revenues are unable to meet the costs of rapidly expanding school districts or urgent infrastructure needs.

Rural counties have few solutions on the revenue side.  Their property tax rates are already relatively high, while local sales tax revenues tend to be very modest due to an underdeveloped retail sector. 

Urban counties have more potential sources of revenue but face obstacles to drawing on them.  Many options are permitted only by appeal to the legislature, while property tax revenues tend not to keep up with assessed values.

The rationalization and regionalization of service delivery, the creative adoption of public-private partnerships (for example toll-roads) and other efficiencies will alleviate some of these problems, but they are unlikely to completely solve them.