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Originally published: 2013-04-16 19:40:55
Last modified: 2013-04-16 21:27:56

County votes 3-2 on sales tax change

Watauga County commissioners voted 3-2 Tuesday to change the county's sales tax distribution method, an action expected to cost the town of Boone about $2 million next fiscal year.

The board also directed County Manager Deron Geouque to hold off submitting the resolution to the N.C. Department of Revenue until April 30 to allow for potential last-minute compromises with the Boone Town Council.

The switch from a per capita to a hybrid ad valorem method has been in the works for several weeks since the Boone Town Council made changes to its multi-family housing regulations.

Commissioners Chairman Nathan Miller, prospective buyer Phil Templeton and others said the changes would jeopardize the pending $18.9 million sale of the former Watauga High School property.

The resulting sales tax proposal pitted county against town but also caused division among the Board of Commissioners. Republican Commissioners Miller, David Blust and Perry Yates voted for the change Tuesday, while Democratic Commissioners Billy Kennedy and John Welch voted against.

Kennedy and Welch described being left out of the process and criticized what they called a lack of transparency by other board members.

"I'm kind of confused -- or maybe not -- as to what the motive is as to this, whether it's good fiscal governance or whether it's just payback," Kennedy said, adding that he saw the county's actions as bullying.

Welch also said he felt the process needed more input from the public.

"I can't be part of a process that brings in personal and professional vendettas that will not only hurt 17,000 county residents within the town of Boone but also any county resident that owns a business in the town of Boone, that does business in the town of Boone, without having an open and honest discussion," Welch said.

The Republican commissioners focused their comments on the particular ordinance change but also more generally on what they called shortsighted and unfriendly regulations by the town of Boone.

"The bullying started with the town of Boone," Blust said. "They've been bullying people for years, and I'm sick of it."

Yates railed against the town's "unfriendly practices in parking, zoning and permitting," including its steep slope ordinance, required green space ratios and prohibitions of more than two unrelated people living together in certain areas.

"I feel tax revenues should be directed to municipalities that display good stewardship," Yates said. " ... I think you have to live with consequences of your decisions, and I think there's been some poor decisions made (by Boone) over the last 25 years."

Yates, who is the son-in-law of Templeton, the prospective buyer, also addressed questions about whether it would be a conflict of interest for him to vote on the sales tax matter. He said he consulted with County Attorney Four Eggers and the N.C. Ethics Commission to determine whether he ought to recuse himself.

Eggers said Tuesday that the law states that an elected official should refrain from voting on any matter in which he or his spouse expects to receive "direct financial benefit." He added that he believed Yates was not in conflict regarding the sales tax issue and therefore had a duty to vote.

Since the sales tax proposal became public, the town and county have been unable or unwilling to meet to discuss the situation. Boone offered to hire a mediator to meet with both boards in closed session, but the county refused on the grounds that it would violate state open meeting laws.

If the resolution is submitted to the state, the change in sales tax distribution will go into effect July 1.

Because sales tax revenues change from year to year, it's impossible to know exactly how the allocations to each town and the county will change. But county staff prepared estimates based on the 2011-12 sales tax figures.

By the county's estimates, the town of Boone would lose about $2 million from the change.

The towns of Beech Mountain, Blowing Rock and Seven Devils signed resolutions last week agreeing to return 60 percent of the increases they would receive to Watauga County to prevent the county from losing money.

With the hybrid model, Beech Mountain would gain roughly $470,000, Blowing Rock would gain about $334,000 and Seven Devils would gain about $73,000 -- estimates based on 2011-12 figures.

Watauga County expects to receive about $400,000 to $500,000 more from the change.