Economic Impact to Date

In the 1990’s the Currituck Beach was the shining light of the Outer Banks. Currituck’s wide sandy beaches were pristine and uncrowded. Thousands of families invested several billions of dollars in Corolla to buy lots and build their dream vacation home or open their small business. Premium rental rates help defray ownership costs and drove up property values. By 2004 Currituck’s Beach was generating almost two-thirds of all the County’s tax revenues (property, sales and OT).

At the same time the Beach only uses a small share of County services as it is largely a family summer vacation mecca with less than 1% of school kids, a very low crime rate and compact service area. This allowed the County in 2005 to drop the Property Tax rate to $0.32 per hundred, one of the lowest in the state.

To capture more tax dollars from tourists the County announced plans to raise the Occupancy Tax rate, ostensibly for beach nourishment after Hurricane Isabel. At the 2005 public hearing on the County’s plan to raise OT rate by 50% the Currituck Chamber of Commerce spoke against it. From the minutes of that hearing: “Willo Kelly, President, Currituck Chamber, stated that several businesses were opposed to an increase and questioned if it was really needed because of the soft rental market. “ Although County Board members Paul O’Neal and Paul Martin voted against the increase, the other three Commissioners approved it.

As we now know, none of the OT tax increase went to addressing the issues behind the weak rental market. The extra money and more went to build a YMCA, buy a horse farm, build ball fields on the mainland and subsidize the property tax rate. According to the audit reports, the County spent more OT for a single fire hydrant in Grandy than they did on beach nourishment.

In part due to this lack of re-investment, the 2012 property tax re-valuation showed that BEACH property values had crashed forcing the County to raise the Property Tax rate for the entire County by 50%. This shocked the Economic Development Advisory Board (EDAB) and precipitated the analysis shown below on the economic impact. But did these facts change the County’s strategy? NO! Instead the County continued its waste of OT revenues - “business as usual” AND they closed down the EDAB to remove and silence the dissenters.

As shown above, investment slowed dramatically in 2005. The Chamber of Commerce knew it at the time.

The County should have known it. The data on new investments and property sales comes in to the County Tax Department every month. Every sale, every building permit is recorded. Occupancy tax receipts are reported monthly. The County knew, or should have know, what was going on with the economics of the Beach long before the 2012 revaluation.

Shown in the several graphics below are excerpts from a briefing given to Commissioners in 2015 by members of CCA and the Economic Development Advisory Board explaining what had happened and suggesting what should be done to fix the situation.

Real estate agents boast about the high revenues generated by beach homes. But they don’t talk about the real economics considering the true costs of ownership: mortgage, insurance, cleaning, maintenance, rental agent fees and long term furniture replacement and home repairs. With these considerations most beach rental homes are cash flow negative. They are a good financial investment only when property resale values are rising, as has not been the case here at the beach for a decade.

Corolla has become very crowded as more homes with more bedrooms have been built. With more people on less dry beach, the pristine beach vacation value has declined.

Individual beach property owners pay the price when they go to sell, many times below what they paid in the early 2000’s. Dropping sales prices drive property valuations down and thus a decline in the County’s tax base, driving the tax rate up as occurred in 2013.

The 2020 property tax re-valuation is underway Preliminary indications are for continued decline in property values in the beach area and lower Currituck offset by strong growth due to new development in the full service northern mainland area. The property tax rate probably will rise but not as significantly as in 2012. The burden of paying for full services will continue to shift to the mainland unless the County can invest OT in the beach in ways to reverse the decline caused by neglect over the past decade.