Phelps defends record on taxes


D. Cole Phelps


By Jon Hawley
Staff Writer

Sunday, August 5, 2018

Democratic state Senate candidate Cole Phelps is defending his record on taxes and spending, noting tax increases he supported as a county commissioner in Washington County were needed to fund retirement benefits for employees of the former county-owned hospital. He also notes that thanks to his efforts, the tax hikes in 2016 and 2017 were actually less than what county officials were initially proposing. 

Phelps, an attorney in private practice, is seeking to represent not only Washington, but 10 other candidates in the sprawling Senate District 1. His opponent in the November election is state Rep. Bob Steinburg, R-Chowan, who has consistently voted for Republican policies during his three terms representing House District 1.

In an interview last week, Phelps discussed some of the accomplishments and challenges he's faced since becoming a county commissioner in 2012. One of the challenges, he said, is adequately funding the retirement benefits of employees of Washington County Hospital.

Phelps recounted that, about a decade ago, Washington commissioners sold the hospital to HMC/CAH Consolidated but the county remained liable for retirees' pension benefits. The county hadn't been paying enough into the pension plan, he said, forcing current commissioners to catch up the shortfall.

The shortfall led commissioners to approve property tax rate increases in 2016 and 2017, according to the N.C. Department of Revenue and minutes from meetings of the Washington County Board of Commissioners. The meeting minutes show the county was facing a budget shortfall in 2016 requiring about a 5-cent increase in the property tax rate. Funds generated by the tax hike would have gone toward employee raises as well as the pension debt.

According to the minutes, Phelps supported, unsuccessfully, a 2.5-percent across-the-board reduction in county spending to close the budget shortfall. He then proposed, and commissioners voted 4-1 in favor, to raise Washington’s tax rate by only 2 cents, addressing the rest of the shortfall with revenue from county fund balance.

Commissioners faced another 5-cent tax rate increase last year, but Phelps swayed other commissioners to trim the hike to 3.5 cents — albeit by funding the pensions at less than county staff had recommended. However, commissioners then added another 1 cent to the hike to pay for watershed improvements.

Washington County ended up with a property tax rate of 85.5 cents per $100 of valuation, one of the highest property tax rates in northeastern North Carolina. Notably, Washington has to raise revenue from a small tax base of $979 million. By comparison, Currituck's tax base is about $6.2 billion, requiring a tax rate of only 48 cents per $100 of valuation.

Acknowledging his support for the tax increases, Phelps said he and other Washington commissioners had no alternative in funding the hospital pensions; those were a promise the county had made to retirees, he noted.

“I'm not a tax-and-spend person,” Phelps said.

To underscore that point, Phelps noted he convinced Washington commissioners to fund local teacher supplements without raising taxes.

Phelps recounted that Washington used to be one of the only counties in North Carolina not to provide local supplements to teachers. Though the state sets teachers' base pay, counties may contribute to their pay. Not having supplements made it harder for Washington to attract and keep good teachers, he said.

“That didn't make sense to me,” Phelps said.

He said he proposed paying each teacher a supplement of $1,500, but the county ultimately compromised on supplements of $600 per teacher. The county funded the supplements through across-the-board spending reductions, Phelps’ campaign said in a follow-up email.

Phelps said one of his proudest accomplishments was helping lobby for the reopening of a rural health clinic in Creswell in early 2016. He said a Golden LEAF Foundation grant helped open the clinic about five years ago, but service had been inconsistent since then. That was a major problem, he said, because Washington residents sometimes have to drive half an hour or more for basic health care.

Phelps said he and other Washington commissioners met with Roanoke-Chowan Community Health Center CEO Kim Schwartz to implore the center open the clinic. The county was able to work out a lease with low starting rent to get the clinic restarted. The clinic now sees hundreds of patients a year, far more than expected, he said.

Asked how his experiences in Washington County would influence his approach to state finances and North Carolina’s roughly $24 billion annual budget, Phelps said he would support additional revenues to support state services, particularly education.

He criticized Republican lawmakers for passing $3 billion in tax cuts he says will predominantly benefit the wealthy, claiming it will shortchange needed investments in public education. He also criticized GOP legislators for failing to pass legislation that would've asked voters to approve $1.9 billion in bonds for school construction this fall. Phelps said a successful bond referendum wouldn’t have required the state to raise taxes to cover the bonds.

While Phelps and other Democrats claim Republicans have not invested enough in public education, Republicans say they've increased educational spending almost every year they've been in power since 2011. In the latest state budget, GOP leaders touted some $700 million more in funding for public education, saying it covers teacher raises and enrollment growth, and includes more money for school supplies and school construction.

Despite the funding increases, there are still a number of struggling schools in northeastern North Carolina. An N.C. Department of Public Instruction spreadsheet shows there are 15 “low-performing” schools across Senate District 1, including six in Pasquotank County and four in Washington County.

Phelps claims Republicans' funding levels are maintaining the status quo for schools, not providing enough money to ensure all improve.

“I know we can do better than 39th in per-pupil expenditures,” Phelps said. Teachers still buy their own supplies and teach from outdated textbooks, he said, noting that “in some of the text books, George Bush is still the president.”

Asked what investments would have the best impact on school performance, Phelps called for more support for experienced teachers who can mentor others, as well as funding the “unfunded mandate” of smaller class size requirements in grades K-3.

He said district residents also remain concerned high schools aren't providing enough career and technical education opportunities that can help students land good jobs without attending a four-year university.

Notably, Phelps earlier this month received the endorsement of the N.C. Association of Educators, who said he had shown commitment to public education.