County staff warns switching adequate-facilities tax system could cut revenue and require state action

County commissioners spent more than an hour on July 14 reviewing options to replace the county———————————'s current adequate-facilities tax (AFT) system with a new statutory framework referenced in recent legislation (HB2426). Staff and counsel warned the change would be legally and administratively complex and could reduce collections unless the county meets several conditions.

County staff said the switch would require repeal of the county———————————'s current private act and adoption of a capital-improvements program before implementation. Staff also said the statutory framework discussed in the briefing carries new rate caps and growth requirements: a cited cap of $1.50 per square foot (residential and commercial/industrial) with a commercial cap applying to the first 150,000 square feet, an initial four-year period after which increases could be limited to 10% and would require a two-thirds vote, and a requirement that the county sustain a roughly 20% growth rate over each decennial census period to remain eligible for the new structure.

Those requirements matter because, staff said, the county——————————— currently collects an average of about $2.8 million a year from the AFT (the budget line shows roughly $3.1 million in a recent year). If the county cannot sustain the required growth, staff warned, the county could lose its ability to levy an adequate facilities tax under the new scheme. "Once we repeal the old one, the old one's gone and we can never get it back," a county staff presenter told commissioners during the briefing.

Staff also described a shift in collection responsibility under the private-act framework the county now uses: if builders fail to pay required AFT charges, the municipalities that issued the building permits can be responsible for reimbursing the county under the current act. Staff said that distinction already has practical consequences: Hendersonville currently owes the county $225,841 for building permits issued without the AFT being collected, staff said.

Commissioners asked detailed procedural and fiscal questions. Staff emphasized several procedural preconditions to implementation: (1) repeal of the current private act or other enabling action; (2) formal adoption of a capital improvements program before implementation; and (3) two separate county legislative readings each adopted by two-thirds vote to set new rates under the statutory framework. Staff also said the statutory language limits commercial collections for very large projects, which could reduce revenue from projects that previously generated higher AFT receipts.

Budget impacts were discussed in rough terms during the meeting. Staff noted the county currently averages about $2.8 million annually in AFT revenue and that the proposed statutory approach could increase collections in some scenarios but also carries downside risk if growth requirements are not met. One speaker estimated a possible 10-year yield of tens of millions of dollars under optimistic assumptions; staff cautioned those estimates were sensitive to growth and to statutory caps. The codes director and county legal staff were cited in the presentation as having reviewed aspects of the change.

No final policy action to change the tax structure was adopted on July 14. Commissioners and staff agreed to continue work on the matter and to move detailed consideration to the county budget agenda for further review and action in a later meeting. The county———————————'s staff recommended additional legal and financial analysis before any repeal or adoption steps.

Ending: Commissioners directed staff to return with more detailed legal and fiscal analysis and to consider the question as part of upcoming budget work, leaving any formal repeal or adoption decisions for a future meeting.