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Originally published: 2013-04-09 18:40:43
Last modified: 2013-04-10 15:08:43

Towns consider hybrid tax distribution model

While Boone and Watauga County continue to quarrel about the town's development rules, the county is asking the other local towns to support its threat to change the sales tax distribution method.

The town councils in Beech Mountain, Blowing Rock and Seven Devils considered resolutions at their meetings Tuesday supporting the county's proposal, which would increase the annual allocations to each of their towns.

They also were asked to consider a hybrid distribution model that would cut their gains but also prevent the county from losing money from the switch.

The meetings were ongoing as of press time Tuesday.

The Watauga County Board of Commissioners first suggested the change from per capita tax distribution to ad valorem tax distribution in response to the Boone Town Council's changes to its multi-family housing standards.

Commissioners Chairman Nathan Miller and others have said the changes are jeopardizing an $18.9 million offer from Templeton Properties on the former Watauga High School and permanently decreasing the land's value.

If the tax switch occurred, Boone and Watauga County would lose money, while the towns of Beech Mountain, Blowing Rock and Seven Devils would gain substantially.

But the county recently received new information that its losses would be greater than expected, Miller said.

If the county moves to an ad valorem distribution method, the sales tax collected would be distributed to any body with taxing authority -- including the area's rural fire departments and Boone's Municipal Service District.

Instead of Watauga County losing about $182,000, which it originally estimated, the county would lose about $1.1 million from the switch, Miller said.

"The county would suffer a bigger loss than what we originally anticipated, but there are ways to offset that loss," he said.

Miller said he has been talking with the town managers and council members of the smaller towns about a hybrid model in which the towns set to gain money would agree to share a portion with Watauga County to prevent it from losing money.

"They are willing to share," Miller said.

In Seven Devils, for example, the resolution stated that the town would keep only 40 percent of the net increase in revenue caused by the switch, giving Watauga County the other 60 percent. The terms of the resolutions for Blowing Rock and Beech Mountain could not be confirmed as of press time.

If all the towns agree to the plan, the county would likely gain about $500,000 instead of losing $1.1 million, Miller said.

Despite having little interest in the root issue -- Boone's multi-family housing standards -- the towns of Beech Mountain, Blowing Rock and Seven Devils have now been offered a tempting proposition.

Those towns with small, seasonal populations have felt for years that the per capita distribution method was not equitable, said Seven Devils Town Manager Ed Evans.

"We don't want anything bad to happen to Boone; we're not after that at all," Evans said. "We just want the distribution method not to penalize us. I hate that it would penalize someone else, but we've been penalized for many, many years."

If Watauga County opts to change the sales tax distribution method, the Board of Commissioners would have to approve a resolution by the end of April.

With that April 30 deadline looming, the Boone Town Council and Watauga County commissioners are struggling to find a time for both boards to meet.

Boone Town Manager Greg Young sent a letter earlier this week asking whether the bodies could meet April 23, 24 or 25. County Manager Deron Geouque said the county planned to respond with a request to meet sooner, either this Saturday or Sunday or April 20, he said.

The clock also is ticking on the former Watauga High School offer. Templeton Properties has until May 12 as an inspection period in which it can walk away from the deal, Geouque said, although extensions are possible in the contract.

Phil Templeton indicated in an open letter Monday that he intends to withdraw the $18.9 million offer by the end of the inspection period due to Boone's regulation changes.

Templeton stopped short of actually withdrawing the offer, however, offering a glimmer of hope that the Town Council and Board of Commissioners can come to an agreement.

"It is hoped that civil discourse and cooperation will prevail and that our town and county leaders will work together to abolish the many unreasonable regulations which limit and complicate business activity which is so vital to our community," Templeton wrote. "This will help ensure that, at some point, the former WHS property will sell for the highest possible price and be developed to its highest and best use for the good of all the citizens of Boone and Watauga County."

CORRECTION: An earlier version of this story incorrectly stated the end date of the due diligence period for the Templeton Properties offer due to inaccurate information from Watauga County. The story has been corrected.