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Orange County to open talks with towns on municipal tax-collection fees and ILAs
Summary
Staff told the Board the current municipal tax-collection fee (0.5%) is below comparable counties and may not cover county costs; the Board authorized staff to begin discussions with Chapel Hill, Carrboro and Hillsborough and to initiate talks with Durham and Mebane ahead of June expirations, with a report back in April 2026.
County Tax Administrator Nancy Freeman told the Orange County Board of Commissioners on Feb. 3 that the county's longstanding municipal tax-collection arrangement—under which towns pay 0.5% of amounts collected—appears to fall below the state average and may not sustain the Tax Office's costs for billing and collections.
Freeman said an addendum intended to provide an annual software surcharge has not been used and that turnover in the Tax Office contributed to the lack of implementation. She described a plan to meet with Chapel Hill, Carrboro and Hillsborough to discuss the current joint interlocal agreement (ILA) and the possibility of replacing it with separate, shorter-term ILAs or amending fees, and to initiate discussions with Durham and Mebane whose agreements expire June 30, 2026.
Commissioners discussed Wake County's approach—aiming for municipal fees to cover a percentage of operating and revaluation costs—versus Orange County's largely unincorporated tax base, and raised the need for more data and recommendations from the Tax Assessment Work Group before setting targets. Commissioner Jamezetta Bedford and others urged beginning talks with municipal staff while allowing time to develop accurate figures.
The board voted to authorize the Tax Administrator and Budget Director to begin discussions with Chapel Hill, Carrboro and Hillsborough, directed staff to report back in April 2026, and authorized initiating discussions with Durham and Mebane about extending or renegotiating agreements; the motion passed unanimously.
Next steps: staff will engage municipal staffs, gather data on collection costs and comparators, and return to the board with options in April 2026.
