MEMO TO:
FROM: Frank A. Rush, Jr., Town Manager
SUBJECT: Resolution
Requesting Legislation Authorizing the Creation of a 1% “Beach Preservation
Tax” on All Sales and Use Transactions in the Town of
The Board of Commissioners is scheduled to consider the attached resolution formally requesting that the NC General Assembly approve special local legislation authorizing the Town to levy a new 1% “beach preservation tax” on all sales and use transactions in Emerald Isle, provided such tax is approved by the voters of the Town in a referendum. If approved by the NC General Assembly, the Board of Commissioners, and voters of the Town, the estimated $700,000 - $800,000 of annual tax proceeds would be used exclusively for the Town’s future beach nourishment activities.
Commitment to Beach Nourishment
The Town recognizes the significant quality of life and economic value of its ocean beaches, and is committed to beach nourishment as the preferred strategy to address beach erosion. The Town has completed four beach nourishment projects since 2003 (two large projects and two hurricane “touch-up” projects), is an active participant in the Carteret County Beach Commission, is working with the Beach Commission on a 50-year beach nourishment permit mechanism, and has established reliable and equitable local funding sources to meet 75% of Emerald Isle’s projected future beach nourishment costs.
From my perspective, beach nourishment is a long-term necessity in a community like Emerald Isle, and has become an ongoing and routine service provided by the Town for our residents, property owners, and visitors. Although some in our community may disagree on the most equitable financing method for beach nourishment activities, there appears to be widespread support for the concept of beach nourishment and recognition of the need for an active beach nourishment program in Emerald Isle.
The Town works closely with the Carteret County Beach Commission on beach nourishment activities. The Town and County have developed previous beach nourishment plans and are currently in the process of further developing those plans and seeking long-term permits for future beach nourishment activities. To summarize simply and briefly, the Town envisions nourishing the ocean beaches on an as-needed, where-needed, and when-needed basis in the future, with a goal of balancing storm protection value, recreational beach width, and permitting constraints with the amount of available funding. In short, the Town seeks to nourish the beach as needed before reaching crisis mode, but ideally hopes to complete nourishment as infrequently as possible.
The Town’s long-term financing plan for beach nourishment,
adopted by the Board of Commissioners in January 2010 and endorsed by the NC
Division of Coastal Management in March 2010, relies on a combination of State
and local funding sources to meet future needs.
The long-term financing plan includes a total beach nourishment cost
estimate of approximately $84 million over a 30-year period. Approximately $42 million, or 50%, will be
provided by the existing
The Town’s long-term financing plan relies on the State of
The State’s recent and current budget challenges have been well-documented over the past few years, and it is likely to be increasingly difficult, if not impossible, to secure meaningful State funding for the Town’s future beach nourishment activities. The Town requested $2.1 million from the State in 2011 for a beach nourishment project in eastern Emerald Isle, but was denied due to a lack of State funding. The Town has submitted a new $3 million State funding request in 2012 for its planned FEMA Irene Beach Nourishment Project. The outcome of this funding request will be known in the next several weeks, although a similar outcome as 2011 is expected.
In light of the State’s ongoing budget challenges, which are
not likely to abate any time soon, and the typical difficulty convincing inland
State legislators of the value of beach nourishment, the Town has been
informally considering and discussing alternative dedicated revenue sources
(either at the State level or local level) for beach nourishment over the past
couple of years. Informal discussions
have been held with other NC oceanfront municipal officials, our local State
legislators, and others, and a wide range of ideas has been discussed. Each of the ideas has merit, however, all of
the ideas involving a State-wide or coast-wide revenue source quickly became
bogged down by various political concerns in different jurisdictions. In short, political concerns in
For the reasons above, the Town’s focus shifted earlier this year toward a new, “Emerald Isle-only” revenue source that would be restricted to beach nourishment activities.
Proposed 1% “Beach Preservation Tax”
The attached resolution is the result of much discussion and contemplation over the past few years about the best way to fund the Town’s future beach nourishment activities. The proposed 1% “beach preservation tax” is the product of all of the issues described above.
The attached resolution formally requests that the NC General Assembly adopt special local legislation in the 2012 Short Session that would authorize the Emerald Isle Board of Commissioners to levy a new 1% tax on all sales and use transactions within the Town, provided that such new tax is approved by the voters in a Town referendum. The Board should note that the new tax would apply to all items subject to existing sales and use tax, including vacation rental accommodations, restaurant tabs, gift shop transactions, etc., but is not intended to apply to groceries, non-prepared food items, etc.
The new 1% “beach preservation tax” would be statutorily
restricted to beach nourishment activities only, and could not be used for any
other purpose. We estimate that the new
“beach preservation tax” would generate approximately $700,000 - $800,000
annually, which would be sufficient to replace the anticipated State funding
described above. The Board should note
that there is some uncertainty in this estimate, as there is currently no
reliable data available to estimate sales and use tax collections in Emerald
Isle only. However, we do have reliable
data that indicates that a 1% tax on vacation rental accommodations alone
generates approximately $500,000, and we also know that 1% in all of
If ultimately approved by the NC General Assembly, the
Emerald Isle Board of Commissioners, and the voters of Emerald Isle, the new
tax would ideally be remitted by merchants to the NC Department of Revenue in
the same manner that sales and use taxes are currently remitted. Ideally, the NC Department of Revenue would
process the receipts and then disperse the appropriate collections to the Town
of
Likely Issues of Concern in Securing NC General Assembly
Approval
No one likes anything called a “tax”, particularly a new tax, and that will be an obvious hurdle in securing General Assembly approval. I am hopeful that we can overcome this hurdle, however, due to the fact that:
1) The Town would make the argument that if the State can’t help us fund beach nourishment activities, the General Assembly should at least provide the tools to enable the Town to fund them ourselves.
2) The Town would theoretically be eliminating a potential budget burden for the State, thus making it easier for the General Assembly to balance the State budget.
3) Many inland legislators would likely prefer that beach nourishment not be funded by State tax dollars partially collected by their constituents (“pay for it yourselves”), and Emerald Isle would be doing exactly as they suggest.
4) Ultimately, the voters of Emerald Isle will make the decision on the new tax, and the Town is merely seeking the authority subject to the outcome of a referendum.
Another likely hurdle at the State level is that there are
currently no municipal sales and use taxes in
Additionally, there may also be some opposition to the new Emerald Isle “beach preservation tax” by the NC Department of Revenue because they are not currently set up to collect a municipal sales and use tax. The new Emerald Isle tax would likely require some new coding of tax collections and software adjustments, but these would not appear to be terribly difficult to implement. I would hope that intelligent individuals could resolve these issues in a cost-effective manner.
Prospects for Voter Approval in Emerald Isle
Again, no one likes a tax, especially a new tax, and I suspect that many in Emerald Isle will have that initial reaction. However, when the Emerald Isle voter seriously considers the options available, I am hopeful that he / she will come to the conclusion that the 1% “beach preservation tax” is the best option for Emerald Isle in the long-term.
Essentially, if one assumes that State funding will not be reliable in the future, the Town has 3 options for dealing with this issue in the future:
1) The Town could simply forego the anticipated State contribution, and have an average of $700,000 less annually for future beach nourishment activities. Essentially, the Town would use 75% of the total amount needed, and would simply do the “best it can” with the funds available. This would simply result in less frequent nourishment, less total volume of sand placed, and make the beach more vulnerable and likely to reach a crisis stage. Additionally, I suspect that future beach nourishment costs will tend to increase more than we would all like. Although I don’t think this is the best option for the long-term future of Emerald Isle, it is a reasonable option to consider.
2) The Town could simply double the current 4.5 cent and 1.5 cent special district property tax rates to 9 cents and 3 cents. This would generate an additional nearly $700,000 annually, and would effectively replace the originally anticipated State funding. The obvious negative of this approach is a higher property tax burden for our property taxpayers, particularly those on the oceanfront, and I do not believe that this is the best approach for our community. I suspect that most property taxpayers would prefer that the 1% “beach preservation tax” be implemented, which would obviously share the burden with visitors to Emerald Isle, to a large degree.
3) The Town could implement the 1% “beach preservation tax”. This new revenue source would effectively replace the originally anticipated State funding, would provide ample funding for the Town’s future beach nourishment activities, and would not place as great of a burden on the Town’s taxpayers. One potential negative is that the new 1% “beach preservation tax” would make the cost of visiting Emerald Isle 1% more expensive compared to other choices, however, there is a reasonable belief that this will not have a significant impact on visitor decision-making.
Thus far, I have discussed the proposed new 1% “beach preservation tax” with 12 key business leaders in Emerald Isle, and all but one indicated that the “beach preservation tax” is the best option for the Town to meet its future beach nourishment needs. The other individual was somewhat concerned that the additional 1% cost might cause some of his customers to shop in another jurisdiction, but then also indicated that his prices were much lower than his main competitors anyway, and did not appear to be as concerned about this aspect. Several of the business leaders I spoke with were very supportive, and indicated that they would work to gain passage in a referendum. I still plan to speak to as many more business leaders as possible, but thus far the response from the business community has been very positive.
We have also discussed the 1% “beach preservation tax” with Senator Jean Preston and Representative Pat McElraft several times, and I believe they are both strong supporters of beach nourishment and are supportive of this idea. Ultimately, it is their decision on whether or not to introduce special local legislation, and I remain hopeful that they will pursue this issue for the Town at the General Assembly. I have attached a draft local bill to assist them and the Bill Drafting staff at the General Assembly in writing a formal bill for introduction in the opening days of the 2012 Short Session.
Potential Timetable for Implementation
If the Board approves the attached resolution, and Senator Preston and Representative McElraft agree to introduce a bill, I would expect it to be introduced in mid-May when the General Assembly convenes. If the General Assembly approves the bill before June 30, I believe that there would still be adequate time to schedule a referendum for the November 2012 ballot. (I need to confirm this, but believe this to be correct.)
If the voters approve the referendum in November 2012, I would recommend making the new 1% “beach preservation tax” effective on or after February 1, 2013 to provide ample time for the Emerald Isle business community and the NC Department of Revenue to adjust to the change. This timetable can be adjusted as desired by the Board of Commissioners, and also as desired by the General Assembly. If the timetable for approval is pushed back later than the dates indicated above, I would recommend delaying collection of the new tax until after the 2012 tourism season.
I look forward to discussing this issue with the Board at the May 8 meeting.
RESOLUTION
REQUESTING LEGISLATION AUTHORIZING
THE CREATION OF A
1% “BEACH PRESERVATION TAX”
ON
PROVIDED SUCH TAX
IS APPROVED IN A TOWN REFERENDUM
Whereas, the Town
of
Whereas, the Town, in conjunction with the Carteret County Beach Commission, has completed four beach nourishment projects since 2003, has implemented a comprehensive beach erosion monitoring program, is actively engaged in future beach nourishment planning efforts, and has established reliable and equitable local beach nourishment funding sources, and
Whereas, the Town, in conjunction with the Carteret County Beach Commission, is currently completing and seeking approval of an environmental impact statement and 50-year permitting authority to complete future beach nourishment projects, and
Whereas, the Town’s long term financing plan relies on 50% of future beach nourishment costs to be funded by Carteret County room occupancy tax proceeds, 25% of future beach nourishment costs to be funded by Town of Emerald Isle special district property taxes, and 25% of future beach nourishment costs to be funded by the State of North Carolina’s Water Resources Development Program funded annually by the NC General Assembly, and
Whereas, the State of North Carolina has historically provided funding for NC beach nourishment projects with various cost-sharing formulas ranging from 25% to 50% of total project costs, and the Town of Emerald Isle initially believed that a 25% State contribution was reasonable and possible, given the importance of the beaches to the NC tourism economy, and
Whereas, the State of North Carolina currently faces significant budget challenges, and it is increasingly difficult for the State to provide funding for NC beach nourishment projects, and
Whereas, the Town’s long term beach nourishment financing plan relies on a 25% State cost-share, which equates to an average of approximately $700,000 annually of State funding necessary to implement future beach nourishment projects in Emerald Isle, and
Whereas, the Town is sensitive to the State’s budget challenges, and believes it is critical to implement future beach nourishment projects to preserve our most important asset; thus the Town hereby seeks special legislation from the NC General Assembly to provide authority for a new local revenue source to replace the originally anticipated State funding, and
Whereas, the Town believes that a new 1% “beach preservation tax” levied on all sales and use transactions within the Town of Emerald Isle will generate the necessary funds to replace the originally anticipated State funding, resulting in approximately $700,000 - $800,000 annually for the Town’s future beach nourishment activities, and
Whereas, the Town believes that a new 1% “beach preservation tax” is the fairest method of generating the necessary funds for future beach nourishment activities, considering the other existing local funding sources already established for future beach nourishment activities, and
Whereas, the Town seeks authority from the NC General Assembly for its Board of Commissioners to conduct a Town referendum on the levy of the new 1% “beach preservation tax” and, if approved by the voters of the Town, the authority to levy such new tax,
Now, therefore, be it resolved by the Emerald Isle Board of Commissioners that the Town hereby requests that the NC General Assembly, in the 2012 Short Session, approve special local legislation authorizing the Town of Emerald Isle to establish a new 1% “beach preservation tax” levied on sales and use transactions occurring within the Town limits of Emerald Isle, provided such new “beach preservation tax” is approved by the voters of Emerald Isle in a Town referendum.
Be it further
resolved that such special local legislation should stipulate that all
proceeds from the new 1% “beach preservation tax”, if authorized by the NC
General Assembly, the Emerald Isle Board of Commissioners, and the voters of
the Town of
Be it further resolved that the Town requests that the NC Department of Revenue collect and remit the proceeds from the new 1% “beach preservation tax”, if authorized by the NC General Assembly, the Emerald Isle Board of Commissioners, and the voters of the Town of Emerald Isle, in the same manner that local sales and use tax is currently collected and remitted to NC local governments.
Be it further
resolved that the new 1% “beach preservation tax” is intended to be levied
on all sales and use transactions currently subject to local government sales
and use tax within the Town of
Adopted this the ____ day of ____________ , 2012.
____________________________
ATTEST:
_________________________
Rhonda Ferebee, Town Clerk. CMC