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Orange County moves to terminate 99‑year tax collection interlocal agreement to negotiate municipal fees
Summary
The Board voted unanimously to terminate the long‑running interlocal agreement that set a 0.5% municipal tax collection fee, aiming to negotiate separate five‑year agreements with Chapel Hill, Carrboro, and Hillsborough. Staff said 0.5% is well below the peer average (~1.5%) and the termination will allow renegotiation ahead of FY 2027‑28.
Orange County commissioners on June 2 voted unanimously to terminate the county’s long‑standing interlocal agreement with the towns of Chapel Hill, Carrboro, and Hillsborough for municipal tax collection so the county can negotiate separate, time‑limited agreements with each municipality.
County Budget Director Kirk Vaughn summarized the history and limits of the agreement, which dates to 1979 with a 2006 update that set the municipal tax collection fee at 0.5% of the annual amount collected and established a 99‑year maximum term requiring unanimous amendment and a one‑year termination notice. Vaughn said a county survey of peer counties found the 0.5% fee is below average — roughly 1.5% in the surveyed group — and currently covers only about 7% of the tax office’s operating costs. He said staff discussed phasing options and would seek to negotiate uniform terms where possible but that final rates would depend on individual town negotiations.
Commissioners expressed support for giving notice to terminate before June 30 so new agreements can be in place for the FY 2027‑28 tax year. Vice‑Chair Amy Fowler moved to terminate the current ILA prior to June 30 to begin negotiations; Commissioner Earl McKee seconded the motion, and the vote was unanimous. Vaughn said the county will continue to bill and collect municipal taxes for FY 2026‑27 while negotiations proceed.
Next steps: staff will give the required notice and begin individual negotiations with each municipality, with an aim to establish separately negotiated agreements (target five‑year terms) that better cover the county’s costs and allow funding of Tax Office improvements tied to the Assessment Division enhancements.
