Durham Transfer Tax Hearing

One of my friends in Durham sent me information about a hearing by the Durham County Commission for the real estate transfer tax. The forwarded email included the following, which I think you will find very interesting.

On Monday, August 13th at 7:00pm, the Durham County Commissioners will hold a Special Public Hearing to determine placing the .25 percent sales tax Option, .4 percent transfer tax option or both on the ballot this November. If the transfer tax is approved locally, the current .2 revenue deed stamp tax would increase to .6 percent. On a $150,000 home, sellers currently have to pay $ 300 at closing. Under this proposed tax, it would increase to $ 900.

It is critical that we have a room full of REALTORS® present to deliver the message that “this is a bad idea” and the impact it will have on housing affordability in Durham.

Please highlight your calendar and plan to join your colleagues next Monday night at the Durham County Commissioners meeting. We need a strong contingency of REALTORS® present at this meeting or else this option will be placed on the ballot for voter approval.

The Special Public Hearing will be at 200 East Main Street, 2nd Floor, Old Courthouse at 7pm.

Folks in Durham, we need a stronger contingent asking that it be put on the ballot.

Do you think that the Minneapolis bridge has got people thinking about how to pay for infrastructure?

Comments

Has the realators ever shown

why they are opposed to this transfer tax?

I mean, "I don't want it" don't cut it.

What empirical evidence have they provided that shows a transfer tax is horrible? That a transfer tax is a plan by the local government to get money and not do what the money is for?

The argument that it will stop growth does not cut it. Where is the evidence of this? Have they shown a community that was growing and all of a sudden a transfer tax was approved and the growth for that community just flat out stopped? Where is proof of something like that happening?

What is the real reason realators are opposed to a transfer tax?

You won't ever get an answer on that, Parmea.

They'll pretend to answer, but it will be pages and pages of spin, "full of sound and fury, signifying nothing".


Be the change you wish to see in the world. --Gandhi

My grievance is that this

My grievance is that this tax is targeting 'existing' homeowners as well as those new homeowners who will be prepared for the tax. As a matter of fact, I wouldn't be so against it on my next home purchase, but existing homeowners should be exempt from the tax (until title changes hands).

Also, the tax targets those who have had enough faith in Durham to invest in it by purchasing a home rather than renting. Renters get the same benefits of living in each city having this tax, but they are exempt from paying property tax and, now, a transfer tax. Why not throw a tax on renters?

Lastly, if the tax passes, then it should only be on the gain on the property, not the entire amount. Buying a home is risky. Especially now because any time property is involved, then there is risk. It's an investment. if I must pay a transfer tax on a property that sells at a loss simply because the city of Durham could not improve their image enough to warrant appreciation and, thus, better buyers, then it's unfair that I be penalized even further.

If more taxes must be applied, then it should be the sales tax rather than the transfer tax. In the long run, I'm sure I'll pay more, and the city will get more, but at least we're all in it equally based on the amount we purchase. Although I certainly disagree with the tax on food -- no one should be taxed on food from a grocery store. Fast food, yes. Food for daily nourishment, no.

If a transfer tax comes into play and is passed, then it should be passed on to all residences including renters and, yes, only on the profit generated from appreciation. But then again, I'm sure all those investors who are renting out to renters will increase those rents accordingly, and agents who receive a commission will be asked to lower their commission to compensate for the tax (most likely, it'll be a combination of that and raising the price -- but in this market and the terrible perception that Durham has, it'll be tough for the homeowner regardless).

And this is just the beginning if its passed. Durham needs more owner occupied homeowners and less slumlords and renters. Adding more costs to homeownership will only detract rather than encourage -- especially in a declining market. Of course, renters don't see it that way, I'm sure.

Renters pay property tax

Renters pay property tax through their rent not unlike the way most homeowners pay property tax through their mortgage escrow.

Property tax is a tax targeting "existing" homeowners and yet the revenue from residential property is not sufficient to provide the services required by residential property. Commercial property takes up the slack just as it will with the transfer tax. Transfer tax is targeting the transaction, not the buyer or the seller. Though the seller will be legally liable, in practice it will be a matter of negotiation just like other elements of a property transaction.

Only 40% of the transfer tax revenue will be paid by existing homeowners and will be paid at transaction time when the money is in play. Property tax is due yearly and increases are often experienced as an increase in escrow amount. Failure to pay these increases can lead to foreclosure. Considering the fuller costs of home ownership at closing is more responsible than abandoning homeowners with an artificially low purchase "price" at closing and an escalating "price" of ownership.

Stop The NC Home Ticks

Everyone is exempt

from the Transfer Tax until they sell their property. Don't want to pay it? Stay put.

Durham County has a $210 million bond on the ballot in November. Revenue from the transfer tax will pay for $132 million of that bond. Without the transfer tax, debt service on the bond will be paid through higher property taxes on everyone, including existing homeowners.

Two points

I just lost a long reply to a fat finger error, but here's what I have to say in brief:

We as homeowners will pay for the new schools one way or the other. Through property taxes, transfer taxes, or sales taxes. For a lot of reasons, I think the transfer tax is by far the fairest.

Second, Durham's housing market is hardly declining. I'm making a tidy profit on my little old 1920s spot in Old West Durham. Durham's market remains healthy, even in the midst of the declining market.

You've been a member here for 10 hours. Now, that could just be because you followed my link here from one of the messages I passed around, but I wonder... What neighborhood are you in? Your concerns address a city that sounds much more like an outsider's perception of Durham than that of people who live here. But the view from a different part of the city or county could be different. Being a geographer, I'm always interested in how location affects perception.

MTB

Just for reference, I vote at the Cole Mill Road Church of Christ, Precinct 37.

I agree that the Transfer tax is the fairest of the options we have available. It won't keep the property tax rate from ever going up, but it will help. Like you, I stand to make a nice profit whenever I sell my home. The pending reassessment for next year will probably be stunning - an average increase across the county of 40% in 6 years.

In the meantime, I would like it a lot if my child did not go to school in a trailer.

I'm a member of many blogs

I'm a member of many blogs and community outreach programs along with living on the outer edge of NECD (not a historical zone). Having been on this blog for 10 hours has no bearing on this. However, as many of the communities like Trinity Park, Old West Durham, Hope Valley, are appreciating, our area is struggling along. Although there are many people like myself who have invested in the area and hope to make back what we put in the property -- certainly, we're not thinking about making a tidy profit. We're taking a risk in trying to help improve the neighborhood from the inside out... most people aren't doing that. And with that, should I decide to move and we sell at a loss simply because others don't want to live in this area, then I don't think that a tax benefit should be in order if there is a loss.

Look, I'm not against taxing a profit should anyone benefit from a city's appreciation. But I would say to make it fair, that the tax, since it's separate from our property taxes, should be on profit only above what we paid for the property. I'm concerned that we will take a loss on the property when we do sell, and doing so only compounds the pain of selling. And it's tough enough alone to sell a house around here. We're not the upwardly appreciating areas that were noted previously.

Even then, If the tax were enacted, I rather it be a buying tax rather than a selling tax. At least, then, I know what I'm in for when buying the house. "Existing" homeowners are being hit up upon to bear another burden. It's more principle than, really, a stopping block to selling a property. We'll sell the property. Eventually. I just feel like my hands are tied and we're being penalized for home ownership. A sort of then against us because we were able to save up enough to buy a home and invest in an area where others would not even tread.

Yeah, if we stood to make a 'tidy' profit, we may not be so concerned. But for fairness, if the tax must exist, then the tax must be placed on profit only. I couldn't support anything more than that -- and there, I'm being flexible about my own stance since there are indeed good arguments here (and, yes, I already have taken into account that less money would come in to the kitty if we didn't tax the whole amount).

Is anyone else flexible in their way of thinking? Or should homeowners pay this tax even if they lose on the sale of their house?

We'll pay either way

My point on this is that the transfer tax doesn't come out of the blue and add to the costs we'll be paying. The school construction bonds that these are being targeted for will go forward -- the commissioners effectively have no choice in the matter. The need is there, and politically, they're not going to short change the schools. So, regardless of whether your property values are going up or down, if we don't have the transfer tax, you'll pay this in property taxes. A senior citizen with a fixed income and no intention of selling his or her home would pay the property tax, and would in fact end up paying more than a young family that moves in from New Jersey and puts their kids directly into schools.

I see your point about profit from the house, but that's not really fair either. Then, that same senior citizen who bought their house 50 years ago in NECD for $10,000 and sells it today for $60,000 would end up paying a the same amount more than someone who swooped in and grabbed a house in Trinity Park for $450,000, put in a few fix ups, and flipped it a year later for $500,000.

Under the .4% transfer tax on base value, the senior citizen would pay $240, but the flipper would pay $2,000. I think that's a lot more fair. And again, I have to compare it to property taxes. The $10 million generated by the transfer tax would be roughly equivalent to $.06 per $100 valuation in property taxes. If we guess that the tax value of that $60,000 house is $50,000, the senior citizen will pay the same $240 in property taxes over 8 years even if he or she never sells.

Anyway, I have to say thanks for moving in to NECD. I looked at houses over there, I couldn't give up the idea of being able to walk to Ninth St. I just got back from a city council meeting on Cleveland-Holloway, so NECD is on my mind at the moment.

I feel the same way about property tax

I feel the same way about property tax: "being penalized for home ownership". It's based on the full value of the property just as sales tax is based on the full value of a product not the added value.

A lot depends on how you define losing (or gaining) on the sale of a house. Market prices only? Include loan and other closing costs? Realtor's commission? Interest expense? Re-fi costs? Insurance? Maintenance & repairs? Federal mortgage interest deduction? Sweat equity? Comparison to renting? Opportunity costs? Avoided costs? Commuting cost?

When I bought my house it was the most expensive on the street. It was an act of faith. Now people are buying houses to demo them to build houses even more expensive. In a buyer's market a transfer tax will be an obligation of the seller and vice versa. In a seller's market the seller can expect concessions from the buyer. Either way, for the seller it is "deferred" property tax.

I respect your personal situation but, somewhat harshly, the county's needs, especially for education, and especially in Durham, exist regardless of housing prices. Oversupply of new housing can suppress prices but place high demands on services. Transfer tax supplements property taxes that can't rise fast enough to meet the needs of growth. It's not a quid pro quo and isn't best for every county but it's a way to spread the burden from just sales tax and property tax.

I don't think a fair tax exists anywhere and I think the best strategy is to ease the pain by spreading it around. I believe in less taxation by more taxes, that is, get rid of the peaks and valleys of revenue from a narrow tax base and create a stable stream of revenue in order to better manage expenditures.

I enjoy constructive replies...

I won't say that I am completely sold on the idea, but your empathy on the situation at hand along with your fine commentary (both gregflynn and MTBinDurham) and examples help make the idea a bit more digestible. Taxes are always a terrible thing when they come out of nowhere, or even planned. Makes me think of medieval times. However, if the tax money is used for something that benefits the whole, including those who are taking the burden of the tax, then I can understand and support it.

My problem and speculation lies in our present government to wisely spend the money for the benefit of the community and the tax payer burdened with the tax. Having read so much about our presently elected Durham officials and how they are NOT managing the infrastructure to the best of their ability or with the community's input, I highly doubt that my tax dollars will be used well. And, yes, I'll be paying even more and soon when everything gets reassessed and I must pay higher property taxes. What will they really do with the money?

Although, when I think about how much I dislike the transfer tax on existing homeowners, I still believe the tax should be placed on the property upon the buyer when making the sale. I could have dealt with that when I purchased our property. Then, if we move down the street and buy a new home, I'm already prepared when I go into the sale. But, that's a small concern. Not enough to sway or change the transfer tax.

However, I don't have the answers. I don't think anyone else here does either. But modifications to the transfer tax could be made to make it more equitable. Maybe the amount taxed is on profit. Maybe the tax is exempt when a house is sold at a loss (still steadfast on this point). Maybe it's taxed on the total if it's bought and sold within a short period of time, like with federal capital gains taxes (you know the 2 out of the last 5 yr. rule). Something more equitable and fair.

On the other hand, the city could make a lot more money if they simply reassessed each property upon the sale of that property. That would certainly bring in more revenue per year. And it's something I'm more accustomed to in the first place. However, that's just shooting me in the foot because a transfer tax is far more less expensive to the homeowner than a reassessment every time a property is sold. But if we're talking about dollars and raising revenues for the city, this would be more of a money making opportunity for the City of Durham.

I'll tell you, on of the the primary reasons we moved to Durham was due to it's pride. No matter where we looked, we found more people proud of this city. But sometimes I think it would be delightful if each and every residence in this city on each and every block in this city would donate just ten bucks (an arbitrary number) to the cause on a consistent yearly basis. Just a wonder, of course. But I do wonder how much of an impact that would make. Would we need taxes if that were the case? Just a fantasy, of course, but one can indulge.

As I said, I'll need to mull things over since I've only known of this particular issue for a short period of time. I'm still not convinced, but I do appreciate the constructive replies to my own commentary.

Durham's government

Having spent all of yesterday afternoon in city hall for a combination of work and activism things, I got to hear that Durham is currently a finalist for Municipal Excellence awards. The city doesn't have a press release yet, but there's an article from the National League of Cities on it. Durham is the only city in the country to have two programs nominated as finalists.

Durham city government has problems, but so does every city government, and for that matter, so does every organization. There are definitely nepotism and a few blind spots in city hall, but I think the city government works pretty well on the whole.

Just wondering

Are you a realtor, DurhamMan?

Just some thoughts

Although, when I think about how much I dislike the transfer tax on existing homeowners, I still believe the tax should be placed on the property upon the buyer when making the sale. I could have dealt with that when I purchased our property. Then, if we move down the street and buy a new home, I'm already prepared when I go into the sale. But, that's a small concern. Not enough to sway or change the transfer tax.

The existing homeowner is enabling the collection of this tax BY selling the property in question. Without the seller, a buyer would not come to the county with their money.
When you look at a sale of a property (U.S. Department of Housing & Urban Development, settlement statement, legal document for the sale of my house), there is two columns one for the borrower's transactions and one for the seller's transaction. It is a semantics issue as to who is paying this tax. From the grand total of money provided by the buyer everything should be paid out. Failure on the buyer and seller to determine all the expenditures are included and calculated is a problem that should be caught. However, the people that are involved in this transaction SHOULD be smart adults and should be able to catch this.

So who pays this transfer tax? Well, from the columns, the seller does, however, the seller has no money without the buyer stroking a huge check. Arguably, some can say the seller, but really, its both buyer and seller.

I was the buyer, but I gave the seller the money needed to pay the transfer tax. I am paying due to my 30 year loan, $3/month additional because I financed this tax. I recognized that this tax was on the sale, but it did not even concern me. Because I wanted this house, I ignored this. It was not till much later that I even figured out this line item on this document. A transfer tax for a normal buyer/seller is not an issue. It is not a deal breaker.

I dont have the documentation for the selling of my house in Virginia Beach, but I am sure as a seller I also paid some form of transfer tax in that city. Again, it was not a concern to me whatsoever.

An extremely valid concern

My problem and speculation lies in our present government to wisely spend the money for the benefit of the community and the tax payer burdened with the tax. Having read so much about our presently elected Durham officials and how they are NOT managing the infrastructure to the best of their ability or with the community's input, I highly doubt that my tax dollars will be used well. And, yes, I'll be paying even more and soon when everything gets reassessed and I must pay higher property taxes. What will they really do with the money?

Once a county or city gets so big that the politician feels they are above their constituents these concerns kick in. Really, even in my small county, this happens, but at least I can walk in and talk with my county manager and when we have the commissioner meetings, we can get face to face with em and ask them about our concerns.

Keeping an eye on them and letting them know your out there will make them spend your money more wisely. Knowing the issue and working with your politicians will give them the "kick" they need to do the wise thing.

But modifications to the transfer tax could be made to make it more equitable.

The city or county should be doing things to make their community improve causing home sales to climb. Failure of the legislators of the community to perform this will get them fired in the elections.

To establish a tax with growth potential incorporated is not fair. The community needs to know up front what the price is. To try to word a legal policy that enables a tax based on net growth of the property would be extremely difficult. Also, I dont want my infrastructure moneys to have a chance to be reduced because of growth potential. No, when you sell a piece of property, the city/county get .4% to 1% of the gross sale of the property for infrastructure. Easiest and truly most fair method.

Points well taken. Thank

Points well taken. Thank you. I've been mulling the transfer tax over and it's probably the easier tax to swallow if I, as a homeowner, must bear this burden. However, it leaves me anticipating what other tax I must consume simply because homeowners are an easy target (much like smokers are an easy target for taxes -- and I'm a non-smoker, too, but think that's getting out of hand for those who smoke). I expect, once this tax is passed, it will continue to rise along with the regular tax rate, along with any other new creatively written tax that comes down the pike.

Sadly, this tax only helps, from what I read. It doesn't solve. But it appears most are resolute on having things only help. To me, that's not good enough. Eventually, this tax, like others, will not be good enough to even help and then we're off to the next tax.

Although I wonder, if this is an issue of making the city more money, why the city is NOT reassessing properties upon the sale of such properties? Wouldn't that bring in more money? For a city with rising values, wouldn't that bring in more money from the success of that city? Sure, it's a tougher tax on the homeowner, but it appears that everyone is really concerned with making Durham stronger by bringing in more money. That would certainly do it? When I think of that and how reassessments only occur around here every several years, the transfer tax is a small tidbit to swallow. But, reassessment would be far better. And it sounds like everyone would be happy with bringing in more money because Durham would have more to spend on infrastructure.

Just a thought. I appreciate the kind and constructive responses here because I don't certainly claim to know it all. It's great to see others providing well thought out responses.

Except for you, Todd. I haven't read anything from you that has helped improve the balance of my viewpoint. I mean, asking me if I'm a realtor (which I'm not). That's purely a setup question for your opportunity to slam another person when they replied. And, frankly, realtors are people who are also part of the community. Just because they chose that profession doesn't void them of independent thought and it certainly doesn't mean they have an agenda simply because they are part of that profession. No. Purely childish but, moreover, unproductive.

Most small "r" realtors are terrific people.

The big "R" Realtors© are the ones who are banging the drum and spewing talking points and not acting as members of the community, but more as a PAC. Our local newspaper (not in Durham) is full of them. The Homebuilders© are another group who behave in the same way. The builders I know are great guys. The group has drunk the Kool-Aid.

I can't pretend to be inside Todd's head, but I think that's why he asked the question. Sometimes it helps to know who you're talking to, and why they're responding the way they are. And no, I'm not suggesting your responses sound anything like someone who has "drunk the Kool-Aid". This has been an interesting discussion to read.


Be the change you wish to see in the world. --Gandhi

Unfortunately, a lot of big

Unfortunately, a lot of big groups go about doing things independent of the community they represent, so I do understand this aspect of things. Let's face it, each state's Realtor force has helped propagate a real estate market with ultra-positive talk even when that market showed signs of stress (but positive talk is, obviously, now not cutting it).

So, if this state's PAC of Realtors have an agenda, why are they so against such a tax when its impact will not really all that bad, supposedly? Just curious since there is a lot of finger pointing.

I think you have misunderstood

my position on this, DurhamMan. Having seen the amount of money and misinformation that the realtors association spent trying to stop the legislature from granting the transfer tax option to counties, I have a healthy distrust of realtors when it comes to this issue. I have seen some very similar points about re-development that you have made posted on a Durham listserve by someone who is a realtor, so I thought it was a fair question.

In regard to your question about reassessment, NC mandates that the counties reassess property values every 7 or 8 years. Durham has moved to a 6-year cycle, with new values coming out this fall, and will be on a 5-year cycle the next time around. This is an effort to be sure that areas with a higher rate of appreciation are carrying their fair share of the total tax burden. The reevaluation process is neutral when it come to tax revenue - the tax assessor sets the values, but the County Commissioners set the tax rate. It is the tax rate that determines how much tax revenue that the county brings in each year, and with reassessment, counties typically lower the tax rate so that it is essentially revenue neutral. It is not neutral for each property owner though, since not everyone's property increases in value at the same rate. I am not certain that reassessment at the time of a property sale is legal in NC. I beleive that the entire county must be done at the same time.

In regard to the transfer tax, all revenue from the proposed transfer tax or sales tax will go to the County, not the City. The County does not build or repair roads or most other types of infrastructure. What the County does build is schools. There is a $210 million bond issue already on the ballot for this November, of which $199 million is for schools. This money will pay for new schools, land for others, and a lot of repairs and renovations (HVAC, roofs, paint, fire alarms). This is the second installment in $500 million in capital projects needed for DPS. The average age of a school building in Durham is 41 years old, and these buildings must be maintained. Durham Public Schools also uses more than 120 "mobile units", a.k.a. trailers, across the county. DPS operates many of the few trailer parks allowed in the County.

The debt service on the bonds, plus future ones for the schools, a new courthouse ($100 million), a new social services complex (another $100 million), and other capital projects, will have to be paid by the taxpayers of Durham County. That money will come from the property tax or the proposed transfer or sales taxes. County Manager Mike Ruffin has said that revenue from the transfer tax would pay the debt service on $132 million worth of bonds. The transfer tax would essentially pay for 2/3 of the bonds, offsetting the need for a property tax increase (about 4.5 cents) to pay the debt service for that portion of the bonds.

A 4.5 cent property tax increase costs the owner of a $100,000 home $45 per year. The .4% increase in the transfer tax would be a $400 tax if that $100,000 home is sold. So in about 9 years, the homeowner is better off with the one-time transfer tax than the annual property tax. If the property is not sold, the homeowner is better off from day 1 since no transfer tax is paid.

Raising the property tax severely impacts people on a fixed income, especially the elderly and working poor. The transfer tax will help to reduce the need for the County to raise property taxes, which is one of the reasons I support placing it on the ballot for a November referendum, as well as supporting the ultimate implementation of the transfer tax.

for all

I have a healthy distrust of realtor's when it comes to this issue.

The distrust you should have is for the realtor's lobby and the executives of the realtor's association. These folks are the ones pressing not to enable us to choose if we wish this transfer tax or not.

No one is forced to use a real estate agent to buy or sell a property. Both parties go into the purchase willing to utilize the services a real estate agent offers. If you dont wish to provide 3% to 6% of the price of the property to someone else, dont use a real estate agent. Do the work yourself.

If everyone bought and sold property without utilizing the services provided by a real estate agent, the realtor's association and this fight would be over. It is a choice we all have.

Todd, your post is awesome!

Thanks, Todd! Your reply was

Thanks, Todd! Your reply was definitely more insightful and one I respond more favorably to.

As for your question, I often see such one liner questions posed on boards to setup an individual for an attack. I expected the same since this blog is overwhelmingly in support of the tax. Nonetheless, asking the question with an explanation as to the motive of the question may have quelled my suspicion. Your response certainly has, of course. ;)

I'll need to do some investigation on the need and proposal of the courthouse, social services complex, etc. in relation to the efficiency of the existing similar items that are already implemented before I actually decide against or for the tax. I guess that's why were here, to solicit information so that we can each make a wise decision.

Again, however, a lot of variables to consider including who should bear the burden of supporting the efforts the new money and how that money will be used and why. The tax is one thing. What that tax is used for is another. And if that tax should be used for new efforts or improve existing efforts is another thing (I'm only for applying taxes to new efforts provided that the existing efforts are running at optimum efficiency and success).

Altogether will determine my support of the tax. But at least my choice will not be a based on a knee jerk reaction. Hopefully, all voters are the same.

Durham County

has posted a summary of how the various tax options effect the property tax rate needed to pay the debt service on the County's Capital Improvements Plan. By the year 2017, we will need either:
- a 18.49 cent increase in the property tax.
- a 14.86 cent increase in the property tax combined with the additional sales tax.
- a 12.26 cent increase in the property tax combined with the transfer tax.

The transfer tax that saves us 4.32 cents of the tax rate in 2009 will save us 6.23 cents by 2017.

Assuming the Capital Improvements Plan is carried out (and no other funding options become available), one of these 3 is going to happen.

If you stay in your house for 100 years

you will not pay a dime to the county due to this transfer tax...Only when you sell your home or buy a home will you pay any money because of the transfer tax.

To request renters pay anything regarding this transfer tax would be wrong to the renters. They are not buying the property. Renters will not pay anything with regard to the transfer tax.

When you sell your home, at that time, the seller will have to pay from .4% to 1% to the county because of this transfer tax. Why the seller and not the buyer? Because from the sellers side of any home sale comes all the funds paid requirements.

Regardless of what side of the ledger the transfer tax comes from, the buyer and seller are going to incorporate this tax into the agreed upon price of the property. It just another thing that has to be added into the formula. Not that difficult to include and not a mystery as far as the calculation is concerned.

This tax will never impact anyone until they sell the house.

You're short-sighted if you

You're short-sighted if you think that costs like taxes, insurance, etc. aren't passed on to renters. My landlord's property taxes went up - my rent went up. He's not subsidizing my life, you know. I'm paying him to be able to live on his property. He's a business man (albeit a friend as well.) He'd be foolish to not include all of his costs of owning this property, plus some profit, in my rental cost.

If he sold the property to someone else, and a land transfer tax were in effect in this county, and the new owner wanted to continue to rent the place to me, I would expect that the cost would be included in my rent, the next time my lease was renewed. I would be surprised if it wasn't.


Be the change you wish to see in the world. --Gandhi

Thats not short sighted

If I owned a rental property, I too, would push as much of the new taxes to my renters. Thats just business since.

Yes, when he sells that property, you could expect to see the transfer tax in your rent. Its all part of the price the owner calculates for the rent requested.

So the renter does pay the transfer tax

on a rental property.


Be the change you wish to see in the world. --Gandhi

yes

I'm paying him to be able to live on his property. He's a business man (albeit a friend as well.) He'd be foolish to not include all of his costs of owning this property, plus some profit, in my rental cost.

Let's Take a Few Cases

You live in a home appraised at $300,000. You sell the house. Among the closing costs, there will be an additional $1800 for the transfer tax. Is that really going to be a dealbreaker?

Or you live in a townhouse that is appraised at $72,000. You sell the house. Among the closing costs, there will be an additional $420 for the transfer tax. Does that make the house unaffordable?

Now consider this. You are a land flipper. You buy 100 acres for $3 million ($30,000 an acre). The transfer tax on closing on this is $18,000. You sell to a homebuilder after grading the streets, putting in electricity, water and sewer, for $6 million ($60,000 an acre); the transfer tax is $36,000. The homebuilder builds houses on the 200 lots you created and the land portion of the sale is the equivalent of $80,000 a lot. The revenue from the sale is $16 million; the transfer tax on the cumulative sales is $96,000. So the total revenue raised over roughly a three year period is $18,000 + $36,000 + $96,000 = $150,000. Now ask yourself if that is enough to cover the additional county services that 200 new families will require. If it isn't the cost of the expansion of services is being born through property taxes by the existing homeowners who are not selling.

This tax targets existing homeowners only if they are selling their homes. Sometime they will be able to have the buyer pay the tax as part of the closing costs. Other times the seller will have to take a "sellers discount" on it. In rare instances, the lender might decide to pay the tax to sweeten the deal.

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

I overheard a developer talking with my county manager

on infrastructure. Part of the plan for development of his housing complex was to provide the infrastructure needed. Yes the price of this will be eventually translated to the people who eventually buy the houses.

The developer will have to pay upward to 5 million just for the water pipe upgrades.

This county does not have a sewer system. Power will be the responsibility of the local power company to get down there. What is nice, if I understood where this was to be placed, the upgraded water pipes will help people between the last good spot to the new housing complex.

So in this new housing complex, the new people will have in the price of the houses, the cost of those water pipes as well as infrastructure. We still have to provide EMT and fire protection for these new folks.

Under this plan, my taxes are not going up for this new housing complex. The folks are going to pay for it. They dont even know it! And they really wont care. They will be happy with the price of the house and will buy it. or they wont. It is up to the developer to put in houses that will be able to absorb these improvements.

This is part of the issue of being a developer and a land "baron". This is smart land development IMO.

Infrastructure and Infrastructure

Typically, the developer is required by subdivision regulations to provide infrastructure on the site, including roads, water, sewer, electricity, open space, sometimes wider lanes on an arterial street that provides access to the development, and sometimes sidewalks. Developers do not usually pay for traffic signals, although they might in some cases. And they definitely do not pay for school classrooms brought about by the new housing units they build. So all over the state, when a new school is built in a growth area, within 2 or 3 years the school needs temporary classrooms.

So there is infrastructure on the site and infrastructure provided by the county off the site. The transfer tax answers the need to fund expansion of the infrastructure off the site.

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

But don't forget

Now ask yourself if that is enough to cover the additional county services that 200 new families will require. If it isn't the cost of the expansion of services is being born through property taxes by the existing homeowners who are not selling.

the additional (annual) property taxes collected from the new 200 families moving in. The transfer tax is merely a supplement, and should be combined with an effort to minimize the impact of periodic property value reassessments on annual tax burdens.

Good Point

Say the houses are $300,000 apiece (not unusual for new construction in the Triangle). Here we leave the world of developers and enter the world of homeowners. The transfer tax on each house-and-lot is $1800. The property tax on each house and lot is roughly $3300 per year. So the total revenue if everything sold in January of the first year would be $360,000 in transfer taxes and $660,000 in property taxes. That would mean that in the first year the development would provide $1,020,000. But only if every lot and house sold during a single year. In most developments that does not happen. But the burden on the county to provide increases in capacity comes all at once. You can build 1/35 of a classroom for each new student. Or hire 1/35 of a teacher. And I think that the situation in local government is that even with the transfer tax, in rapidly growing areas they will not keep up with the growth in budget; at that point either tax rates are raised or services are cut. And there are too many assumptions that continued growth will continue to raise property values. If that is not the case, counties in North Carolina will be in a real financial bind. Being a "low-tax" state has its risks.

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

That's why growth planning is important.

You can't wait until:

But the burden on the county to provide increases in capacity comes all at once.

this happens to take steps, or you wil be constantly behind the 8 ball.

If you aren't allocating revenues for needs 5-7 years (or more) down the road, you're either ignoring future needs or you don't know what those will be, both of which are wrong and guarantee a looming crisis.

The transfer tax will help, but it shouldn't be used to take care of the new folks, it should be dedicated to the ones who'll be moving here later.

I sent a note

to a bunch of my friends on the Durham Democratic Party listserve. If we can't get this passed in Durham, we will be hard pressed to get it anywhere.

I can't thank you enough for sharing this...

The Durham blogosphere is just kicking into gear on this. Just with this e-mail alone I can probably get 15 people there I wouldn't have been able to otherwise.

Go ahead, Realtors. Let's see what happens when you bring that weak crap in here. If the commissioners don't chicken out on us, when it gets to the ballot, we'll hand them their ass on a silver platter. I'm going to be really interested to see who shows up for their side. I'll be seriously disappointed if any of local firms show up, but I'm guessing they won't. I'm guessing it's going to be the big Fonville-Morrisseys and the other big outfits out of Raleigh that are constantly telling people they don't want to live in Durham, and they should be living in Cary or Knightdale.

Game on.

Which Realtors

I'm guessing it's the property-flipping developers who would have to pay $30,000 on a $5 million sale of property to a homebuilder.

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

50 states, 210 media market, 435 Congressional Districts, 3080 counties, 192,480 precincts

Realtors = anti-democracy?

Kevin and i both blogged about this today, and there's some discussion on Dem email lists as well.

I think we should be able to convince the Commissioners to at least put it on the ballot, and let it be decided in the court of public opinion. I think it has a good chance of passing there, which probably explains why the Realtors want to stop it now.