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Patrick Gannon: Builders’ windfall?

RALEIGH – I recently received an email from an acquaintance in Wilmington, where I used to write for the local paper.

There, real estate, building and development interests have long had an oversized influence in local politics, as they do elsewhere. Anyone who disagrees with that should check themselves into New Hanover Regional Medical Center.

The email’s subject line read: “Sickening clout of builders in legislature.” It was about a bill moving through the General Assembly to exempt “builders’ inventory” from city and county property taxes for a few years.

Put simply, if a builder or developer bought properties, then built single-family houses or duplexes on them, the value of those improvements couldn’t be taxed by local governments for up to three years or until the house was sold. The owner still would pay taxes on the land’s original value. The bill also would offer an exemption for commercial properties, although it would be for infrastructure, such as water and sewer lines and roads, but not buildings.

The bill would cost cities and counties as much as $66 million annually in property tax revenue, estimates show. The building industry puts the cost of the residential exemption at about $35 million a year. Both the N.C. Association of County Commissioners and the N.C. League of Municipalities oppose the bill because local governments would still provide services – mainly police and fire – but couldn’t tax the properties at full value.

There would be benefits. Builders would build more, putting more people to work. And ultimately, those improvements would be taxed, bringing in more tax revenue to local governments than if those properties weren’t developed. A study from the N.C. Home Builders Association showed the residential exemption would lead to the construction of 507 new houses across the state in 2016 that wouldn’t otherwise be built. That would generate about $31 million in state and local fees and taxes and create more than 2,100 jobs.

The industry also notes that the revitalization of the state’s economy depends on the housing industry’s continued recovery.

But the bill – House Bill 168 – seems out of whack with other things happening on Jones Street, so it’s hard to believe it hasn’t attracted more attention. The measure passed the House, 110-7, with only liberal Democrats voting no.

Last week, it breezed through the Senate Finance Committee. The Republican-controlled Senate has been adamant about ridding the tax code of exemptions and other favorable treatments to certain industries. “The government shouldn’t pick winners and losers,” certain senators love to say. This would seem to fly in the face of that. The legislature has scaled back or eliminated perks to other industries, even with evidence that the incentives produce economic benefits.

There’s also the fact that the N.C. Home Builders’ Political Action Committee, or PAC, contributes generously to the campaigns of Republican and Democratic lawmakers – and has for a long time.

That’s the point my acquaintance in Wilmington made in his email. He said the builders contribute so much to legislators that their bills pass with little discussion. “Even a real estate broker like myself can only take so much from my industry when it gets special benefits at the expense of the rest of taxpayers,” he wrote. One lobbyist dubbed the bill the “Home Builders Windfall Act.”

Mike Carpenter, the longtime lobbyist for the Home Builders Association, disagrees with the notion that political contributions are playing a major role here. He cites the strong support of the full House and senators during committees. “At the end of the day, it’s the strength of your ideas that makes the difference,” he said.

Sounds like a debate worth having as the bill continues its push through the Senate.

Patrick Gannon writes columns for Capitol Press Association.

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