For poor in wealthy mountain areas, new taxes a likely hit

AP News
Posted: Jan 10, 2015 11:45 AM
For poor in wealthy mountain areas, new taxes a likely hit

LITTLE CANADA, N.C. (AP) — The chill made it harder for William Broom to get around his yard, but he stood outside anyway, hoping a Christmas tree buyer might drive up.

Some years, Broom makes $400 on the trees to supplement the $1,400 per month he and his wife receive in disability and Social Security. But this season, he didn't sell many.

Broom and others with limited incomes could face higher bills when counties surrounding two of North Carolina's wealthiest mountain communities increase property tax rates to offset a sputtering vacation-home market. Modest homes with steady values are more likely to face higher bills after revaluations take effect this year in Macon County and next year in Jackson County, where Broom lives.

"We got enough taxes in my book," Broom, 80, said. "It's hard to live on the income I got."

Before the recession began in 2007, taxes on surging housing values and new vacation homes fed county coffers and kept rates low. But construction slowed, empty lots lost value and some vacation homes entered foreclosure or sold at a loss.

Now, county leaders are factoring in declines that are expected to result in tax rate increases. Increased, flat or slightly lower values will mean higher overall bills for homeowners.

Both counties rank among the state's wealthiest in property value per capita, but about one in five locals lives in poverty. Poverty rates put both in the state's worst economic development category.

L.J. McVay, a father of two, said he struggles, earning $7.50 hourly at a pizza chain. After a sewage leak at his last apartment, McVay said charities helped him rent a trailer with government aid.

"We looked everywhere," McVay said.

Nationwide, many counties adjusted property tax rates after the recession to make up for lost revenue. But while it's common, it's a tough call for local leaders. Rate increases in resort areas could discourage second-home buyers, who provide revenue that helps lower the cost of county services for taxpayers, said Erik Johnson, an assistant professor of economics at Quinnipiac University in Connecticut.

Joan Youngman, a senior fellow at the Lincoln Institute of Land Policy, said state law allowing counties as much as eight years between assessments "can cause sticker shock" for homeowners. In North Carolina, the two counties did their last assessments near the market's height.

Even a small tax increase could be tough for Loretta Lynn Zachary, who lives with her mother, Bessie, in a Macon County house built by Habitat for Humanity and valued around $100,000. Social Security and disability pay them $1,300 total monthly.

Loretta Zachary, 46, worked in restaurants including one her family owned in the resort town of Highlands until diabetes put her on disability.

Despite family roots in Highlands, about 20 miles south of her home, she said: "If I was to get dressed in my best attire that I would have, and go to Highlands and eat in one of their restaurants, I'd probably be stared down."

Rick Westerman of Habitat said some vacation-home owners complained a few years ago when he built near them in Macon County.

"They gave us a fit," he said. "Habitat's got that stigma: Not in my backyard."

This month, Macon County will mail homeowners valuations reflecting a nearly 15 percent countywide property value decline, county tax administrator Richard Lightner said. To bring in similar revenue, county commissioners would need to raise taxes from about 28 cents per $100 of property to 33 cents.

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Lightner saw the most volatility in homes previously valued between $500,000 and $600,000 — common prices for overextended vacation homeowners.

He said homes in the $100,000 to $200,000 range were more stable. For example, officials cited a home that held its value around $128,000. Under the expected increase, annual county property taxes would rise by $64 to $421.

Jackson County Manager Chuck Wooten said that if his county's revaluations took effect last year, commissioners would have needed an increase from 28 cents per $100 to between 35 and 37 cents.

Wooten said more taxes could shift to year-round residents in the northern end of the county: "And that's going to be a real difficult problem to explain and make our people feel good about."

The state allows tax relief for elderly and disabled homeowners with limited incomes, but their bill would still reflect rate changes.

During a spring meeting with the Cashiers Chamber of Commerce, homeowners in the wealthy community told Wooten they were shouldering Jackson County's tax burden without enough in return.

"It's been a point of contention," said real estate agent Ken Fernandez, a chamber board member.

About 20 miles north lies Little Canada, where Broom grows a couple dozen firs in uneven patches on the acre around his house. He sells mostly to neighbors but thinks the trees have gotten too big for homes near him.

Once a worker on highways and dams, Broom said he lost a hand in a rock loader in 1962, then worked another decade before a heart attack put him on disability.

Despite getting by on limited income, he said: "I've survived a pretty good while!"