When municipal Privilege License authority was repealed last year, promises were made by the legislature that a source of replacement revenue would come forward this year. Without a replacement, municipalities will lose more than $62 million in combined revenues.

A recent survey conducted by the North Carolina league of municipalities found that one quarter of the communities affected by the repeal are expected to increase property taxes to make up for the revenue loss. Another similar percentage of cities and towns are examining service reductions and elimination of employee salary increases. Employee salaries have been largely stagnant since 2009 making it very difficult for municipalities to fill some skill positions. Across the state cities and towns with municipal electric, water, sewer, storm water and waste collection systems are proposing to raise utility fees and increase transfers from their utility funds to their general funds.

There is little argument among municipal leaders, business owners and lawmakers that the Business Privileged License tax is archaic and can’t be administered fairly. Never before, however, was it proposed to eliminate it without providing a substitute. The business privilege tax was originally state revenue but was shifted to municipal revenue to compensate for a previous state revenue grab from cities and towns. Over the years legislators had riddled it with exemptions for all manner of businesses. They finally decided it was such a mess they would just give it to the cities and towns let them get blamed for it.

In North Carolina, 48 percent of housing units are owner-occupied while rental housing accounts for 52 percent of the units. However, the residents in those owner-occupied units are more likely to vote than the tenants of rental housing. Raising property taxes is therefore frequently a last resort. This is despite the fact that property tax payments can be deducted from federal and state income taxes and residents 65 years of age or over receive a $25,000 exemption in calculating the level of their property taxes. Landlords resist property tax increases which they have to pay even if they can eventually pass them on to tenants. Most renters must pay their utility bills directly and they are not deductible.

Recently it was announced that after April state tax returns were received the state was showing a $400 million budget surplus. Overall, state revenue growth translates into a $1.1 billion increase in the funds available for the state budget. It would seem that the legislature can now easily keep its promise to make up for the revenue taken from cities and towns when it eliminated the Business Privilege Tax.

Jim Smith is first vice president of the Beaufort County Democratic Party.