NEW HANOVER COUNTY — After this year’s revaluation raised property values across New Hanover County by 60%, debate has ensued in at least one beach town about how the property tax rate set by the county commissioners carries an added layer of complexity for municipalities within its bounds.
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The issue was brought up in a Carolina Beach Town Council meeting this week, as some council members expressed concern over whether New Hanover County would set a revenue-neutral rate.
“We all need to lobby for the county to stay revenue-neutral folks,” council member Deb LeCompte said at the meeting.
LeCompte was advocating for it because sales tax revenue shares for each municipality are distributed county-wide based on property tax levies from the previous fiscal year. Data for 2023-24 indicated New Hanover County encompassed a total tax levy of about $228 million. The City of Wilmington made up the most at $97.1 million, or 42%, last fiscal year. Carolina Beach accounts for just over 3% of the total levy with $7.4 million; Kure Beach’s tax levy for the year was about 1.7% of the total, or $3.8 million.
If New Hanover County collects a larger percentage of total property taxes by setting a tax rate above revenue neutral, then municipalities staying at revenue neutral will represent a smaller percentage of that total.
For example, since Carolina Beach’s revenue-neutral tax levy made up 3% of the county total last year, they would expect to earn 3% of sales tax revenue. This year, if the county decided to increase their tax levy above revenue neutral and Carolina Beach remained revenue neutral, Carolina Beach’s share of the total county levy would decrease below 3%.
Based on North Carolina Department of Revenue shared tax data from 2024, Wilmington received $90 million, Carolina Beach received $6.6 million, Kure Beach had $3.4 million, and Wrightsville Beach, $3.5 million. New Hanover County received a total of $240 million.
Counties in North Carolina can choose two ways to divide sales tax shares amongst municipalities, either by tax levy (ad valorem) or based on population (per capita). According to the North Carolina Association of County Commissioners as of 2022, 49 counties in North Carolina distributed local sales tax revenue using the tax levy method and 51 counties do it based on population.
While New Hanover currently utilizes the ad valorem method, neighboring Brunswick and Pender counties base sales tax revenue share per capita. The National Association of Counties indicates a county may choose to go with the ad valorem method to give more sales tax funds to towns that collect more property taxes.
Port City Daily reached out to New Hanover County to ask why it chose the ad valorem method but didn’t hear back by press.
“We know that if everyone else in the county goes up [on this year’s tax rate] and we don’t, we will take a sales tax revenue hit, which we would now have to consider in our budget,” Mayor Lynn Barbee told Port City Daily. “We may not be able to stay revenue-neutral if that happens. That is the source of the concern.”
During the meeting, LeCompte recalled an instance from the past where the town lost about $250,000 in shared sales tax revenue after the council decided to go below revenue neutral to provide a tax cut for residents.
“It was a consequence that nobody even thought of until it was already done,” LeCompte said.
Both Carolina and Kure beaches are recommending a revenue neutral tax rate for the upcoming fiscal year. Revenue-neutral means the towns would only generate enough property tax revenue to fund essential services like fire, police, and public works.
Though it has yet to be voted on, New Hanover County’s rate proposed by staff is $0.355; revenue-neutral would be about 7 cents lower.
Carolina Beach Town Manager Bruce Oakley proposed the beach town go from $0.235 to $0.1552 per $100. Council members agreed with his revenue-neutral approach.
Carolina Beach’s budget is expected to increase by $1.5 million from $22.4 million this fiscal year to $24 million. The biggest changes to the budget comes from a $1 million increase to wages and benefits and a $1.4 million increase in maintenance and operations.
Oakley said utility fees are also anticipated to increase by about 5%, after a 4% increase in 2024-25. The town’s budget proposal shows utility expenses totaling $12.6 million, exceeding the $12.4 million in generated revenue by approximately $212,700. To cover the gap, including $1.3 million for engineering and permitting costs related to long-term infrastructure plans, the town is allocating over $1.5 million from its utility fund balance, with the expectation of replenishing these funds through a planned revenue bond issuance.
While Carolina Beach leaders expressed concerns about New Hanover County’s potential rate, the Town of Kure Beach differed on its dependence. Since Kure Beach encompasses a small portion of the total sales tax pie in New Hanover County, its finance and budget director, Arlen Copenhaven, said any revenue share lost by changes to the county tax rate would be negligible because Kure Beach has such a low tax levy.
“The county tax rate, of course, impacts all the residents of the town because they’re paying that tax based on the value of their property in New Hanover County, but it doesn’t really impact what we’re doing here with the Kure Beach tax rate,” Copenhaven said.
Kure Beach council member David Heglar echoed Copenhaven’s sentiment; though he didn’t have concrete numbers, he estimated a potential decrease to the town’s sales tax revenue share could be around $10,000. Within the context of the budget, Heglar indicated an amount this low would not necessitate any significant changes to the overall financial plan.
Kure Beach Town Council met Tuesday to discuss their budget for the upcoming fiscal year. Copenhaven also recommended a revenue-neutral tax rate, which would change from $0.29 to $0.172 per $100.
Copenhaven added the only determining factor in how Kure Beach decides its tax comes down to the amount of money they would need for the expenses of essential services such as fire, police, and public works. This year’s proposed budget increased from last year by about $600,000 from $12.7 to $13.3 million, with the stormwater fund escalating by $800,000.
According to council members, the raises to the stormwater fund are in direct response to severe flooding damage the town experienced following storms that dropped almost 20 inches of rain last September during Potential Tropical Cyclone 8. Kure Beach council decided to raise the current cost to residents for stormwater fees from $15 a month to $18.75 per month, which would result in additional revenue of about $100,000. Heglar said the town plans on spending over $1.5 million over the next year on stormwater projects.
New Hanover County Commissioners are currently looking at how to reach a revenue neutral tax rate. According to Commissioner Dane Scalise — in favor of revenue-neutral — it isn’t an easy decision for commissioners to agree on.
Scalise said it’s his belief the tax rate should fund “core services” like fire, police, and infrastructure but the debate over what is considered “essential” is where commissioners could be divided.
“I call them wants versus needs,” he said. “You can make a good argument for any number of things, but the government simply can’t do it all.”
When asked whether New Hanover County considers its local municipalities tax rates in the county’s decision, Scalise said no; he is only concerned about New Hanover County as a whole.
New Hanover County commissioners have to come to an agreement regarding the tax rate by June 30 at the latest as the next budget cycle begins in July.
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