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City’s residents ineligible to vote on county sales tax

By Bill Short

Because the Shelby County Chancery Court has ruled that Millington’s sales tax referendum passed in August, the city’s residents are ineligible to vote on the county sales tax increase.

That’s the word from Millington Interim Mayor Linda Carter, who said only residents of the county’s unincorporated areas are eligible to vote on the half-cent county sales tax referendum in the Nov. 6 election.

Millington City Attorney Barbara Lapides has said the city discovered that, in the voting precinct identified as Lucy-1, residents of the Lucy community who are not eligible to vote in Millington city elections were in fact given ballots and did vote on Aug. 2. In that election, Millington’s sales tax referendum was defeated by only two votes, with 1,033 against it and 1,031 for it.

Because Millington believed that its local referendum would be approved if those ineligible votes were removed, the city filed a lawsuit in Chancery Court against the Shelby County Election Commission. And Chancellor Arnold Goldin issued his ruling on Oct. 9.

At its Aug. 27 meeting, the Shelby County Commission voted to override County Mayor Mark Luttrell’s veto of a resolution the commission adopted on Aug. 13 that scheduled the county sales tax referendum.

If the countywide tax hike passes, Carter said, it will preempt “part of” the local half-cent sales tax increase that each of the six suburban municipalities has approved. Although some of the municipalities will receive more money, she acknowledged that most, including Millington, will get less.

“The county won’t get 100 percent,” the mayor noted. “We’ll still get our share, but it’ll be about $400,000 less than we would have gotten otherwise.”

Early this year, the Millington Board of Mayor and Aldermen commissioned Southern Educational Strategies to conduct a study on the feasibility of the city creating a municipal school district and to submit a report to the board. At a mid-March work session, Dr. Jim Mitchell, a partner in SES, briefed the board members on the study’s findings.

He said to create and operate a school district that meets the “standards of adequacy” established by applicable Tennessee law and regulation, a city is required to annually generate and spend local funds that are “at least equal to” the amount that would be raised through a 15-cent tax levy on each $100 of taxable property for each year. But Carter has acknowledged that this will not provide sufficient funding for a school district in Millington. So, she said an increase in the city’s Sales and Use Tax was necessary.

Tennessee Code Annotated Section 67-6-701 authorizes municipalities to set Local Option Sales Tax rates up to 2.75 percent on the first $1,600 of any single article of personal property.

Millington previously set the tax rate at 2.25 percent. And a majority of residents voting in the Aug. 2 city election approved an increase to 2.75 percent.

Mitchell told the board members that there are three things involved in funding a municipal school district: (1) Tennessee Basic Education Program funds, (2) Shelby County property tax and (3) Shelby County Local Option Sales Tax.

So, when SES examined the BEP, the property tax, sales tax and what 15 cents would yield on the local property tax, Mitchell said it determined that Millington could generate approximately $17,333,000 in revenue each year.

Then, the firm looked at the expenditures that would be required to serve the students, to hire employees and provide all the support services.

“We determined that the expenditure level would probably require $18,518,000,” Mitchell told the board members. “What that means is that, if you formed a school district right now, you would have a deficit of $1,184,000.”

But he noted that increasing the Local Option Sales Tax by half a cent could close that “revenue gap,” because it could produce $1,386,000 a year more than what the city has now.

Millington Finance Director John Trusty has said that, if a municipality and the county both enact the Local Option Sales Tax, the county gets the part collected in the unincorporated areas, or in any incorporated area that did not adopt it.

“Straight off the top,” Trusty said, half of the tax is allocated by the county trustee to education and is split on the Average Daily Attendance ratio set by state law between the Memphis city and Shelby County schools.

If there were multiple school districts within the county, he said, the number of students in each of those districts would be added together, and that becomes the “denominator.” What each district itself has is the “numerator,” and it gets that share of the “pie” that goes to education.

“If we have adopted that higher rate,” Trusty concluded, “the other half of the pie would come directly to the city of Millington, just as the local portion comes now. So, under any education funding, there are some dollars that would come back as well to a municipal district, if we had one.”


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November 2012
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