Archived Story

Council discusses sales tax increase

Published 3:44pm Thursday, August 1, 2013

Sales tax and the police jurisdiction were the chief matters at hand Wednesday during a work session for the Alexander City Council.
City finance director Steve Hays said at the request of several council members, the city has been looking at ways to fund a long-term plan for the city’s aging roads.
“The only true tax we have allocated to roads is roughly $180,000 a year,” Hays said. “Since I have got here and before I got here, I think the way things were done was neglect it until you saved up enough money.”
Hays noted that the last major project was the old Dadeville Highway project, which took multiple years to save enough money to complete.
“The first new paving we have really done in a while hasn’t been true paving – it has been all about preserving what is here,” Hays said.
Hays said that the only reason this paving was made possible was due to a $4.4 million bond.
“Going forward, what are we going to do about it? We have gotten fortunate with ATRIP money on a couple of occasions, but what do you do after that?” Hays said.
Hays discussed the potential of a half percent sales tax increase. The state currently has a 3.5 percent sales tax, with 2.5 going to the general fund.  The remaining 1 percent would be split 25 percent for the school debt, 25 percent for the city’s equipment account and the remaining 50 percent to the Sportplex.
Sales tax has not been increased since April 1, 1996.
Hays said this additional half percent sales tax would have amounted to about $1.05 million for the previous year.
These funds, Hays said, could be split as the city sees fit to fund road improvements and the city school system. The council discussed the possibility of earmarking the funds for debt payment, but District 5 councilman Jim Spann said he would like to see a rainy day fund set up for the school.
“I would be more inclined to create a rainy day fund that the city maintains and the board could use if they had a pressing reason,” Spann said.
Spann added that this money would not simply be an account that could be raided at will but instead would require the board come before the council.
“I think we should know what they are doing with it,” Spann said. “If we got it, I don’t argue with giving it, but tell us what you are going to do with it.”
District 1 councilman Bobby Tapley clarified that a half percent sales tax increase would amount to a nickel for every $10 spent.
“A nickel for every $10 might be worth paying to get some asphalt down,” Tapley said.
Discussion then moved to the declining revenue stream from the police jurisdiction.
License inspector Ward Sellers said the police jurisdiction extends three miles as the crow flies from the city limits. In areas where the city’s jurisdiction runs into another city, the difference is split in two.
“(People in the police jurisdiction) pay half the rate for business licenses, gasoline tax and liquor tax,” Sellers said. “On top of that, we get 1.5 percent of Alabama Power’s electric revenue for those individuals inside the city limits.”
Revenue inside the police jurisdiction was $298,000 in 1994 during the hay day of Russell Corporation.
“Today, through year end, it is estimated that we will bring in $168,000,” Hays said, adding that this was a 43 percent decrease. “Revenue coming from the police jurisdiction has decreased faster than any revenue in the city.”
The council discussed the possibility of withdrawing police and fire protection from the police jurisdiction to save funds used for patrolling it. As Sellers explained, those in police jurisdiction essentially get all the same services without paying taxes to the city.
Hays estimated withdrawing from the police jurisdiction would cost the city $168,000 in decreased revenue from the tax on electricity, but could offer savings for eliminating the 153 miles of road serviced by city police.
“The big con would be everyone outside the city limits currently living in the police jurisdiction would have their insurance go up,” Hays said.
Homeowners and businesses adjacent to the current city limits could still petition the council for annexation, which would bring them back within the umbrella of police and fire protection for the price of city taxes.