The state has given counties the option of retaining the 1/2-cent sales tax when the state stops using it on June 30, 2003:

• Macon — Public hearing set for May 6
• Haywood — Has discussed it but not taken position
• Jackson — County manager says commissioners informally supported retaining the tax during a retreat.
• Swain — Administrator says board will likely wait until after 2002 election to make decision.

Macon may become the first of the far western counties to take the state up on an option to retain for local use a half cent sales tax set to expire in 2003.

A public hearing is set for May 6 at 9:15 a.m. in the Commissioner Board Room in the Macon County Courthouse to receive public comment on the Article 44 half-cent sales tax proposal.

The General Assembly added one-half cent to the sales tax last summer to help manage the state budget woes. This half-cent tax is scheduled to end June 30, 2003. The state’s budget provisions also call for an end to county and municipal reimbursements for inventory taxes, intangible taxes, elderly homestead exemptions and sales tax on food stamp transactions on that same date. Counties have the authority to continue the half-cent sales tax to make up for the lost reimbursements.

Macon County Manager Sam Greenwood said that during a recent Region A meeting in Cherokee, representatives from the North Carolina Association of County Commissioners were concerned the state might decide to extend its use of the Article 44 sales tax plus discontinue reimbursements, leaving counties with a huge shortfall. Greenwood said the NCACC suggested counties officially implement the transfer of the half-cent sales tax from the state to the county as a way of letting the state know the counties need that revenue. Counties are free to enact the transfer anytime before the June 30,2003, sunset date, but the local tax will not become effective until July 1, 2003.

The sales tax would be collected by the state and dispersed by the same method used for the distribution of all other local sales taxes. Fifty percent of the allocation is based on population and 50 percent on where the tax was collected.

Because of all the state budget confusion, Greenwood said it would be prudent to go ahead and pass the local half-cent option.

“We don’t think there is any one voice in Raleigh that can speak to the budget dilemma,” Greenwood said.

He said Macon officials saw the writing on the wall after the state froze reimbursements last year. The county has worked to build reserves into its budget. According to Greenwood, the state is currently holding about $130,000 due the county in reimbursements.

“If they take the full reimbursement, it would cost the county $640,000,” Greenwood said.

Estimates are that the local sales tax would generate $1.2 million in revenue each year. While this would be a substantial initial gain over reimbursements, Greenwood said the increases in Medicaid passed down by the state — $300,000 this year and a projected $330,000 next year — would negate most of the surplus.

Although Haywood, Jackson and Swain counties have not drafted any formal legislation regarding the half-cent sales tax option, it is a topic of discussion.

Haywood County Manager Jack Horton said he has discussed the option with commissioners. The state is currently holding $400,000 due Haywood in reimbursements. Horton said one aspect that makes the local sales tax appealing is the fact that it would likely grow as the county grows.

“Reimbursements have been frozen at the 1990 level,” Horton said.

“We haven’t looked at the issue as a board yet,” said Linda Cable, Swain County’s administrator. Cable said Swain may wait until after the general election to address the topic. Kevin King, Swain’s finance officer, said the state is currently holding $65,000 due the county. The local sales tax would generate an estimated $478,000 in revenue for Swain County. Swain’s budget is $6.7 million.

County Manager Ken Westmoreland of Jackson County said commissioners discussed the sales tax option at a recent planning retreat.

“There has been no formal position, but it seemed all commissioners were interested in passing a local option,” Westmoreland said. About $150,000 of reimbursements to Jackson County have been frozen by the state.

Article 44 contains a hold-harmless agreement that assures each county will receive at least the same amount of revenue that was received through reimbursements. Counties must have a public hearing before adopting the local sales tax option.