Tuesday, August 14, 2012

Changing circumstances make county sales tax increase necessary

Shelby County Commission member Mike Ritz still thinks, as he did in March, that a sales tax is a "regressive" tax.
But he calls it the county's best hope to fund the new unified city-county school district, or as many as seven separate school systems in the county.

On Monday the County Commission approved Ritz's proposal to ask voters in Memphis, Millington and unincorporated areas of the county to approve a countywide sales tax increase of a half-cent on the dollar. The resolution authorizing the November tax-increase referendum passed 7-5. It was Ritz's fourth attempt to add the item to the commission's agenda.

Suburban leaders, who had celebrated the passage Aug. 2 of referendums to establish their own school districts – and, in five of six towns, to raise sales taxes to pay for them – were united Tuesday in opposition to the countywide tax hike.
A county sales tax increase would trump municipal tax increases. And because residents in every suburb except Millington already voted for a sales-tax hike, they can't vote on the matter again in November, according to state law.

A county tax referendum also would knock off the ballot a referendum the Memphis City Council approved in July to ask voters to increase the city's local-option sales tax from 2.25 percent to 2.75 percent.

Suburban leaders began crunching numbers Tuesday to understand the effect a countywide tax would have on funding for their municipal schools.

The county estimates that Arlington and Lakeland would receive more money from a countywide sales tax hike than a municipal one. But Bartlett, Collierville, Germantown and Millington would receive substantially less. Numbers for Bartlett, for instance, predict the town would get $3.8 million from a municipal increase, and $1.9 million from a countywide increase.

Bartlett Mayor Keith McDonald sat with a state law book on his desk Tuesday, trying to figure how money for schools would be divided if the increase comes from a countywide tax.

"I can only imagine how hard it is for the average citizen to understand this, much less some of those commissioners," he said.
Germantown Mayor Sharon Goldsworthy said at first glance it appears Germantown would get a short shrift.

"We are clearly impacted by this course of events and would be expected to participate in taxation but don't get a say in something that ultimately changes where money goes and our own need to come up with more money," she said.
Collierville alderman Billy Patton said Collierville residents likely wouldn't approve the countywide increase if they were allowed to vote again.

Even in Arlington and Lakeland, which stand to gain from a countywide tax increase, leaders were miffed by the commission's vote.

"What we can conclude from this is that the commission that is supposed to represent us, doesn't," said Lakeland Mayor Scott Carmichael. "Bottom line. And they wonder why we want to have our own school system?"

Arlington Mayor Mike Wissman said, "We saw what happened when a small portion got to vote on the future of schools with the merger ... you start to wonder, when's it going to end?"

The municipal sales tax increase failed by three votes in Millington, and Millington Mayor Linda Carter was prepared to resubmit the question to voters because of questions about nonresidents in Lucy casting ballots. Now, she said she's unsure of what will happen.
In March, the County Commission, including Ritz, voted 7-0 against a sales tax increase. "For big-ticket items, sophisticated shoppers may shop away from high sales-tax communities," Ritz said at the time.

Things have changed since March, Ritz said. The unified school board released its projected budget, with an anticipated shortfall of nearly $60 million, and the Memphis City Council approved its own sales tax referendum.

The countywide tax resolution now goes to Shelby County Mayor Mark Luttrell, who said he has not decided if he will veto it. He has 10 days from Monday's vote to consider such a move.

He previously said he wanted to delay considering a sales tax increase until the unified school board brings its first budget to the County Commission next spring."Let us digest that budget and determine if the cost figures are hard figures.

"Let us digest that budget and determine if the cost figures are hard figures. Then, if revenue needs to be raised, we'll know how much and we'll move forward at that time," Luttrell said
By then it will be too late, Ritz contends.

If Memphis voters had approved a sales tax increase, that would have left only residents of unincorporated Shelby County to vote in the countywide referendum. Many of those voters live in a suburban city's annexation reserve area and aren't likely to approve it.

"We won't have the opportunity next year and there's no way we have enough commissioners to vote for a property tax increase," Ritz said.

Memphis Mayor A C Wharton said Tuesday he was "troubled greatly" by the vote and had spoken with Luttrell about the issue, but refrained from asking the county mayor to veto the measure until he has a chance to speak with commissioners who represent districts in Memphis.

"We felt this was our opportunity to help us develop an edge by reducing our property taxes significantly," said Wharton of the city sales tax increase that would be bumped off the ballot. "If it were to pass (in the city) a significant portion would go to a property tax reduction. Simple arithmetic would tell you can get a greater reduction with $47 million than with $27 million."

The county expects to raise about $60 million with the sales tax increase. About $30 million will be used for schools and each municipality will receive the remainder, which will be distributed based on the amount of sales taxes collected in each city. For Memphis that is about $27 million.

Memphis City Council member Shea Flinnsaid county commissioners who approved the tax resolution appear to have no plan to sell the increase to voters and that a countywide vote makes the increase less likely to pass.

"It looks like the urban commissioners were more interested in sticking it to their suburban counterparts on the commission rather than thinking about what was in the best interest of their constituents," Flinn said.

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