After a bounty of criticism and a long journey through the Senate, a sales tax redistribution plan is back, and would boost revenue in Rowan and its municipalities more than the original version.

Originally proposed in March by Senate Majority Leader Harry Brown, who represents Onslow and Jones counties, the latest plan would boost sales tax revenue in Rowan County by $8.5 million in four years, according to legislative estimates.

Brown’s plan was first proposed in its own bill — the “Sales Tax Fairness Act.” Last week, it was rolled into to a significantly changed version of a house bill called “NC Competes.” Now, the Senate has rolled the sales tax into its own version of the state budget.

The plan’s latest version shows a significant shift when compared with Brown’s original proposal. When the legislature’s Fiscal Research Division in March first released estimates for counties, all Rowan municipalities were projected to lose thousands annually. Each municipality in Rowan County, in the current proposal, would see a sharp upward shift — about 22 percent — in sales tax revenue, according to the latest version proposal.

The sales tax redistribution plan isn’t entirely a result of changing a mathematical formula. In his plan, Brown bolsters county revenue with an additional half-cent sales tax. Like other taxes earmarked for education, revenue is funneled directly to public school system. It shows up on county budgets, but can’t be used for any other purpose than schools.

Municipalities wouldn’t collect the additional education tax.

Why do it?

At the core of Brown’s proposal is an effort to create a level playing field between rural and metropolitan North Carolina. It ties sales tax distribution to where North Carolina residents live rather than where they shop. Metro areas, such as Mecklenburg County, have criticized the tax redistribution plan as stripped million per year from annual budgets. Gov. Pat McCrory has also called the proposal a hidden tax increase on Charlotte’s NPR station WFAE.

Sen. Tom McInnis, R-25, who was a sponsor of the original sales tax redistribution plan, said economic growth is occurring at a slower pace in most rural counties. Shifting sales tax revenue to rural counties would provide much-needed revenue that could be used for education or economic development.

“There is a need to level the playing field a little and I think this is a good starting point for a conversation,” McInnis said about the sales tax redistribution bill. “The only way we are going to be able to plow out of this ditch is dedication and jobs training for the 21st century.”

As an example, McInnis said rural counties have a difficult time offering large teacher pay supplements when compared with metropolitan counties. In Anson County, McInnis said, the school system can only afford a supplement of about $600. Rowan’s teacher supplement is about $2,000. For Wake and Mecklenburg counties, teacher supplement are several thousand dollars, McInnis said.

Rowan revenue returns

The increase in sales tax revenue wouldn’t necessarily give county commissioners more revenue to parse out among county departments and capital projects. A portion of the sales tax revenue is required by law to be given to public school systems. Another portion would be dedicated to public safety.

The multi-million overall increase in sales tax revenue only equals about few million dollars in funds that aren’t already earmarked for other purposes.

The N.C. Senate’s budget plan to boost revenue in rural counties would increase two tax provisions — Articles 40 and 42 — that are required by law to have a portion of revenues allocated annually to school capital projects. In the approved fiscal year 2016 budget, for example, the Rowan-Salisbury School system will receive $2.6 million and Kannapolis City Schools will receive $133,314.

A boost in revenue for the school system could help with millions in capital needs that have been identified. Commissioners have committed to provide funding for several, high-budget capital expenditures for the school system such as replacing Woodleaf and Cleveland elementary schools. Even with increases in revenue funneled to the school system, school officials have said it’s not enough to permanently fund capital needs on an annual basis.

In November 2010, Rowan County voters also approved a one-quarter cent sales tax specifically dedicated to pay for a jail annex, emergency radio upgrades and communications antennae. In May, commissioners amended the original tax to include public safety capital projects to pay for an Emergency Medical Services station in Rockwell. Multiple times, commissioners have mentioned the possibility of building an Emergency Medical Services Station in Cleveland.

When asked about the proposal, County Commissioners Chairman Greg Edds said he’d rather see how Rowan’s economic growth plays out than see a shift in sales tax distributions.

“In the short run (the Senate’s proposal) is  very appealing, but we don’t know how things will play out in the long term without a change,” Edds said. “We believe we are on the verge of a significant explosion in economic development.”

If the sales tax redistribution passes, Edds said Rowan County may be able to fund school improvement without an additional tax. Rowan County could also fund school system needs through economic development, he said.

Is redistribution worth the effort?

Rowan County’s three newest commissioners — Edds, Vice Chairman Jim Greene and Commissioner Judy Klusman — identified economic development as a top priority during the 2014 campaign season. And, they’ve already begun attracting business in their terms as commissioners.

Commissioners have lured a private airplane charter company from Statesville to the Rowan County Airport and reformed the Building Inspections Department.

Under the Senate’s proposed formula for sales tax distribution, luring retail businesses, such as Dick’s Sporting Goods at Summit Corporate Center, wouldn’t generate as much sales tax revenue as the current method. The current strategy ties sales tax revenue mostly to point of sale transactions — where consumers shop. The new formula, tying sales tax to a county’s population, would result in a lessened revenue from retail growth.

County Manager Aaron Church said the Summit Corporate Center would still result in a sales tax revenue boost with the changed formula.

Property tax revenue wouldn’t be affected by the Senate’s plan.

State Sen. Andrew Brock, R-34, says he supports the sales tax redistribution plan and the additional tax that could be levied following a vote by Rowan’s residents.

“There are school systems in our state that are busting at the seams and need some type of relief,” Brock said. “It could help offset increases in property tax and help counties find a balance.”

He said the sales tax redistribution plan is a part of the Republican strategy to alter the tax code of North Carolina — “to lower the rate, expand the base and carve all the special interests out.”

 Contact reporter Josh Bergeron at 704-797-4246.