A multi-million dollar dispute between Cumberland County, the City of Fayetteville and smaller towns was resolved on Monday morning when county commissioners approved a new, one-year arrangement for sharing sales tax revenue.
The money is from the sales taxes collected on goods and services in Cumberland County and the nine municipalities in the county. An agreement for distributing the money, approved in 2023, had come into question by the governing boards of Fayetteville, Hope Mills and Spring Lake, a City of Fayetteville memo says.
As a result, Fayetteville in the 2023-24 fiscal year held back $1.6 million from the county government.
With the new agreement, Fayetteville has paid the past-due $1.6 million, a county memo says.
Commissioners’ Chair Kirk deViere on Monday said the new agreement gives an additional $5.6 million to Fayetteville, Hope Mills, Spring Lake, Eastover, Stedman, Wade, Godwin, Falcon and Linden.
The City of Fayetteville anticipates its share will be between $2.5 million and $3 million, the city memo says.
Commissioner Adams voted ‘no’
The Board of Commissioners voted 5-1 for the new arrangement. Commissioner Glenn Adams voted “no” and Commissioner Jeannette Council was absent when the vote was held.
Adams said he and other commissioners worked out past sales tax agreements with the city and the towns for more than two decades, with the most recent amendment in 2023. The county should hold them to their past promises, he said. “It was a fair agreement to the county, and so I just don’t think we should amend this, even for the one year,” Adams said.
DeViere disagreed.
“This was a compromise that we felt was in the best interests of our municipalities going into the final year of this agreement,” he said. “It enables our smaller municipalities to have some resources back … from the sales tax revenue.”
Decades-long matter
Conflicts over sales tax distribution date to the early 2000s, when Fayetteville annexed vast areas of the county.
Back then, as it is today, the sales tax revenue collected in Cumberland County was distributed on a per capita basis. As Fayetteville added tens of thousands of people to its population via annexations, its share of the sales tax money grew.
The county made plans to split the sales tax money with the city and the towns based on the property values in each municipality, instead of population. This method, known as ad valorem distribution, is expected to reduce the revenue the city and towns receive and increase the county’s revenue.
To give the city and the towns time to prepare for their revenue reductions, a new revenue sharing agreement was approved in 2023. This is the agreement that was amended on Monday to give a further revenue boost to the city and towns for one year.
Pennies add up to millions of dollars
The sales tax rate for most goods and services in Cumberland County is 7%, or 7 cents on every dollar of the price customers pay when buying something. From that 7 cents, the state government keeps 4.75 cents. Cumberland County and the municipalities split up the remaining 2.25 cents. (Note that groceries are taxed just with the local portion of the tax: 2.25%.)
In the 2023-24 fiscal year, the sales tax “pie” shared between Cumberland County and the city and the towns totaled more than $156.3 million, according to data from the North Carolina Department of Revenue.
Cumberland County’s share would have been $96.8 million, and the city and the towns collectively would have gotten $59.4 million. However, the county in that fiscal year gave $15.5 million of its share to the city and the towns, according to data from the N.C. Department of Revenue.
Senior reporter Paul Woolverton can be reached at pwoolverton@cityviewnc.com.
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