AGENDA #4d
TO: Mayor and Town Council
FROM: W. Calvin Horton, Town Manager
SUBJECT: Interlocal Agreement for Tax Collection
DATE: Jun 26, 2006
The attached resolution would authorize a new Interlocal Tax Collection Agreement with Orange County.
BACKGROUND
Orange County collects property taxes for Town properties within Orange County on behalf of the Town under the provisions of an Interlocal Agreement made effective April 8, 1980. Because of changes in business practices, the County proposes updating the Agreement. Town and County representatives met during the past year to review proposed changes. On May 4, 2006, Orange County Commissioners approved the new Agreement (Attachment 1).
As an alternative to an Agreement with the County, the Town could consider directly collecting taxes. Because the arrangement is more efficient and more cost effective, most municipalities in North Carolina arrange for the County to collect taxes on their behalf. In particular, a municipality would have to bear the cost of personnel and tax collection systems already being borne by the County.
DISCUSSION
The proposed new Agreement includes the following changes:
Collection Charges
Under the provisions of the previous agreement the County charged the Town for tax collection fees based on a formula that resulted in a charge of about one half percent of tax collections for the last several years. The new contract language states the billing will be based on “a rate of 5/10 (one half) of one percent of the total taxes collected”. The change would go into effect no sooner than July 1, 2007, with notification by January 2007.
Tax Collection Software Surcharge
The County has included a provision for charging a surcharge for the purchase and maintenance of new comprehensive software that would include revenue collection. While we anticipate that a new system would provide better information than the current system, we also anticipate that a new system would increase the cost of tax collection. The contract does not include the basis for a surcharge calculation, but states that the surcharge would be based on an agreed formula. The contract further states that the surcharge would be calculated no later than November 30th of the year preceding the next year’s charge.
Termination of the Agreement
The Agreement can be terminated with 12 months written notice.
Order to Direct the Tax Collector to Collect Taxes
The Agreement includes a provision that the Town will adopt an order pursuant to North Carolina General Statues 105-321 (b) directing the tax collector to collect taxes.
RECOMMENDATION
That the Council enact the attached resolution to authorize the Manager to sign the Interlocal Agreement for Tax Collection and provide a letter directing the tax collector to collect taxes in accord with North Carolina General Statutes 105-321 (b).
ATTACHMENT