Creating a Durham Tax Relief Program--Let's Do It Right!

Call to Action:

Advocate to City Council for a tax relief program that addresses the burden of rising property taxes on low-income households. Contact council members (council@durhamnc.gov) and ask that they not approve the Community Development Department proposal (details below) on August 7 and ask them to bring this issue back to a work session later in August for a full comparison of the alternative approaches.  You can also attend the City Council meeting on August 7 at 7:00 p.m. to speak out on this issue. Click read more for background and details. 

Background:
After a long break from April to late July while the City Council was focusing on approving the budget and taking its end of the fiscal year vacation, the Community Development Department has made only minor changes to its proposal for deferred loans to offset tax increases for low income homeowners in three areas of the City that have received intensive neighborhood improvement investments.  The program would last for four years, and loans would have to be repaid when the house is transferred.   Then the high taxes would be waiting for these families with no additional relief. 

If we are going to take the innovative step of creating a local tax relief program, let's do it right and incorporate principles from the circuit breaker relief program in the state. The Coalition for Affordable Housing and Transit has endorsed an approach with these key features.  The access to relief would be available to low income families throughout the city—not confined to residents of arbitrary target areas.  It would cap the percent of income that has to be paid before being eligible for relief to 2% for families with 50% of less Area Median Income and 3% for those with up to 80% AMI.   It would be a continuing program—not limited to four years.  If taxes are above the percent cap, a deferred loan could be received to cover the difference.   Finally, only three years of loans would have to be repaid from the proceeds of the house sale.   The Council did not have time at its work session on July 27 to compare the alternative approaches.  It should not simply approve the C.D. Department proposal without considering the CAHT proposal. 

 

Revised Durham Deferred Loan Tax Relief Program - CAHT Proposal
Endorsed by the Coalition of Affordable Housing and Transit - July 17, 2017
For information, contact svarajh@gmil.com

Revised Durham Deferred Loan Tax Relief Program:

Proposed Features

  1. Provide a property tax cap of 2% for homeowners with income up to 50% Area Median Income (AMI) and 3% up to 80% AMI.  Tax above this cap will be offset by a loan.  These rates provide more needed relief to low income families than those provided in the current State Circuit Breaker program.  

Illustration of impact on households.  The state program expects a family with an income of $29,500 to be able to pay $1180 to Durham City and County before getting any relief.  That is the tax paid on a house valued at over $87,000.  The proposed rates would provide more extensive relief:

Family Income

NC Circuit Breaker Percent Cap

Tax paid before getting relief

Deferred tax for property over this value

 

Proposed Percent Cap

Tax paid before getting relief

Deferred tax for property over this value

$28,300

4%

$1132

$84,070

 

2%

$566

$42,035

               

$44,250

5%

$2213

$164,315

 

3%

$1328

$98,589

  1. Participation is open to all low-income home owner-occupants with at least five-year residency citywide.  It is not limited to the elderly and handicapped.  

  2. The program is limited to persons who are not eligible for other programs with the exception of persons who would only quality for the State Circuit Breaker with its higher income caps.  

  3. Families are expected to repay the last three deferred loans at the time the property changes hands.  Other deferred loans are cancelled.*  

  4. There are no fees to participate in program.

  5. In first year, the Durham City program covers both city and county taxes.  The City should seek a grant from the County to cover all or part of the county taxes deferred.  In subsequent years, the City will cover city taxes only. Efforts will be made by community groups to get the full share of the county portion in the county’s budget for 2018.  At that point, it will be clear what the cost and number of participants is.

Why should owners repay a portion of relief received?  With property values rising throughout the city, there is an immediate cost in higher taxes, but a long-term benefit from the higher value when the property is eventually sold.  It is fair for the families who receive tax relief to return a part of their taxes that have been reduced.  This is limited to three years of the taxes that have been deferred.  This amount will be paid from the gain that the owner has from the increasing value of the property over time.  Owners are protected from higher taxes until they have the return from selling their property.

*If the State Circuit Breaker Program is expanded and reformed in the future to provide comparable relief, the three-year limit would apply to liens attached to the property for either the City or the State program.

 

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