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City’s local sales tax hike to be implemented Dec. 1

By Bill Short

Because the Shelby County sales tax referendum was defeated last week, Millington’s local half-cent sales tax increase will be implemented on Dec. 1.

The Tennessee Department of Revenue will collect the tax, as well as interest and penalties for delinquencies, in the same manner as it is collected by and for the state.

Because Millington residents elected a seven-member school board on Nov. 6, Interim Mayor Linda Carter has noted that it will need “initial funds for startup.” She acknowledged that those funds were not included in the city budget originally approved for the current fiscal year.

Millington Finance Director John Trusty said last week that the preliminary proposed budget for the school board includes four items that will cost a total of $14,909, which he “rounded up” to $15,000.

He said that amount covers items that a “transition committee” appointed by Carter determined would be necessary to “operate” the school board until its members could be elected and start identifying other things it will need, which include employing a superintendent.

Trusty noted that he has been getting that money from the “planned use of fund balance” line item in Millington’s current budget. But after the sales tax has been collected for approximately a month, he will ask the Board of Mayor and Aldermen to amend the budget to “recognize” that revenue and “eliminate” the planned use of fund balance to the extent that the tax will cover the necessary items.

The county sales tax referendum was defeated last week by 172,625 votes, or 69 percent of the 250,700 cast, to 78,075 votes, or 31 percent.

County Mayor Mark Luttrell has noted that he was opposed to the referendum, primarily from the “standpoint of procedure.” If it had been approved, he said, it would have given a “$30 million pass” to the school system, which would have been relieved of the obligation to continue to look for efficiencies.

He acknowledged that merging the Memphis City and Shelby County school systems will be “financially challenging” for the county. But he also noted that, for the past year, he served on the Transition Planning Commission, which submitted 172 recommendations for ways to “pare down” that cost. Only 17 have been adopted.

Luttrell said he hopes the school board will take another look at the recommendations, “craft its budget accordingly” and submit it to the county commission, which will do its “due diligence” and determine the funding level.

“If a tax increase is warranted,” he said, “then we would be able to come to all the residents of the county and say, ‘This is our deficit, this is why we have a deficit, this is how much money we need, and we need to move forward on that basis.’”

Luttrell noted that there is still a “lack of clarity” regarding the future of the unified school system, because the composition of the unified school board has not been determined and a superintendent has not been chosen.

“There are many unknowns,” he concluded. “And to ask taxpayers to weigh in with an additional tax at this time was premature.”

County Commission Chairman Mike Ritz has proposed increasing the county property tax rate to make up the $60 million in revenue that a half-percent county sales tax increase was expected to generate. But District 4 Commissioner Terry Roland said last week that Tennessee law requires a two-thirds vote of the commission to raise the property tax rate by more than 10 cents.

“He can’t get it with a simple majority,” Roland said of Ritz. “He needs nine votes, and I don’t think he’ll get there.”

Roland also noted that state law says the county commission has to fund education only at the same level it did last year. But he said that is “minus” the $57 million that the city of Memphis no longer contributes.

“They keep saying they’ve got to make up that $60 million,” Roland added. “No, they don’t. They’re just going to have to learn to live within their means.”

Because the county commission is on a “long break” now, Roland said it will be early in 2013 before Ritz’s proposal will even be considered. And it must be approved by the General Government Committee before it goes to the full commission.

“I don’t think the commissioners inside the city limits of Memphis will even vote that,” Roland said, “because the people in Memphis will have to pay it, too.”

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. And a majority of residents voting in the Aug. 2 city election approved an increase from 2.25 to 2.75 percent.

Dr. Jim Mitchell, a partner in the Southern Educational Strategies consulting firm, has said 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.

The firm also determined that the expenditure level would probably require $18,518,000, which would create a $1,184,000 deficit.

But Mitchell has said the half-cent increase in the Local Option Sales Tax will close that “revenue gap,” because it can produce $1,386,000 a year more than what the city has now.

And with the defeat of the county sales tax referendum, Roland said Millington will receive all the revenue generated by its local sales tax increase. He called the creation of a municipal school district “tantamount to the survival” of the city.

“If Millington doesn’t get there, and the other municipalities do, Millington’s gone,” he concluded. “Your house won’t be worth anything. Nobody will want to live here. Nobody’s going to want to move here if we don’t have a good school system.”

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November 2012
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