Q&A with John Ed Underwood
Editor’s Note: The Times sat down with Fayetteville Mayor John Ed Underwood, City Administrator Jim Lee and Finance Director Tonya Steelman to discuss why the City of Fayetteville needs to increase its sales tax by one-quarter of one percent. The issue will be on the ballot for city voters Nov. 6.
Q: Describe the sales tax – where does it come from and how is it disbursed?
A: The local option sales tax is a sales tax on any retail purchases. Of the current 9.5% sales tax, 7.0% goes to the state of Tennessee while only 2.5% remains here in Fayetteville. What we are proposing is raising that 2.5% by one-quarter of 1% to 2.75%. To do this, voters in the City of Fayetteville must approve it on the referendum Nov. 6.
That one-quarter of 1% would generate $530,000. We feel as though this is the fairest way to generate revenue. It’s something everyone would pay, whether you’re a rural Lincoln County resident coming into town to shop, a visitor or tourist in our city, or a city resident. It’s estimated that 70% of the sales tax would come from others outside the city. Again, it’s the fairest tax.
Additionally, the state has threatened to take this quarter of a percent to balance their budget. We would rather it be locally used rather than used somewhere else. And, too, the state would not have to have a referendum to do this.
Q: Why does the City of Fayetteville need additional revenue?
A: It’s been nine years since the city has increased property taxes, and while we’ve done a good job at holding down expenses, even to the point of deep budget cuts over the past two years, the city continues to provide the same services. We need to resurface streets, replace sidewalks, maintain an adequate police force, and at some point, we’re going to have to purchase a new fire truck.
We’ve reduced the budget as much as we can, and we’ve cut outside agencies. We’ve also not filled positions and delayed the purchase of new equipment. Still, we’ve not been able to make up for some of the losses in revenue that we’ve experienced. For example, the bottom falling out of interest rates alone has cost the city $80,000 or $90,000. Couple with that increased operating expenses, from the cost of gasoline to the skyrocketing cost of health insurance, and you can see, we are out of options.
Q: If the proposed increase in the sales tax is approved on the referendum, where will that money go?
A: The board has discussed half of it going to capital projects and half going to the general fund. We haven’t funded capital improvements in three years. Normally, we set aside $210,000 for these needs. The biggest number of complaints we receive concern streets and sidewalks – we’ve got to address both of these. And in the long-term, we need to plan for the future needs of our police department. Our department heads have done a great job managing their budgets, but we are at the point now where the need for additional revenue has become imperative.
Q: Is there any one particular sector of our city that should be more concerned about whether the sales tax referendum passes?
A: Approval of the one-fourth of 1% sales tax is especially important to senior citizens and others on pensions and fixed incomes, because the prospect of a property tax increase will mean additional costs. The property tax increase is true whether you own your own home or if you rent, because whenever property taxes increase, landlords traditionally increase rents to offset the change.
Q: What about making additional cuts and eliminating the need for either an increase in the sales tax or in the property tax?
A: There is no way to avoid a tax because funds are needed to balance the budget. No one likes taxes, but the sales tax is by far the fairest kind of tax since it is paid by a large number where as the property tax is paid for by a small number of owners. The sales tax is paid by everyone according to his or her economic ability to make purchases. It is the only kind of tax that gives us a choice. We can avoid the tax altogether by choosing not to buy non-essential items, and in the case of purchases that have to be made, we can reduce our tax by choosing lower-priced items.
Also, millions of dollars of the sales are paid by tourists, and out-of-the city residents, who come into Fayetteville to work or shop, but do not pay any other city tax. This helps relieve the burden on property taxpayers.
A great many people in Fayetteville will benefit from approval of the one-quarter of one-percent sales tax. But if it fails to pass, a great many Fayettevillians – particularly property owners – will feel a tax increase. It’s one or the other.
Q: How does our sales tax rate compare with other neighboring communities?
A: Most of our neighboring communities are already at 2.75% … Pulaski, Shelbyville and Tullahoma are at 2.75%, Lynchburg is at 2.5%, and Winchester and Lewisburg are at 2.25%. The City of Huntsville is getting 3.5% of the sales tax there – their total sales tax is 8%, with 4% going to the state of Alabama, 3.5% to the City of Huntsville, and 0.5% to Madison County. Of course, Alabama also has an income tax and other ways of generating revenue.
Q: How is the city funding its campaign to increase the sales tax?
A: The city is not funding this effort at all. Now some of us have formed the Committee for Fair Taxation, and we are accepting donations. Thus far, our treasurer, Todd Storey, has received about $1,000 in donations – donations can be sent to P.O. Box 1427, Fayetteville, 37334 – and these contributions will be used to purchase some advertising as well as postage and printing for fliers that we hope to send out to every household in town. We feel that our message and the need for this increase is important enough for us to invest our own money in getting the word out.