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City’s sales tax cuts could cost county $1.07M

Posted on Wednesday, January 29, 2014 at 9:36 am

The Fayetteville Board of Mayor and Aldermen’s decision to not renew a sales tax agreement on sharing proceeds with Lincoln County could cost the county an estimated $1.07 million.

During Tuesday’s Lincoln County Commission meeting, county leaders called the City Board’s decision a disappointment, an uncooperative move that will ultimately cost all the citizens of Lincoln County.

The city and county’s governing bodies currently have two sales tax agreements. The first of those, adopted by both bodies in 1979, states that as long as the county gives half of its property tax rate to education, the county will receive half of one percent of the local option sales tax revenues from within the city. Currently, the county does that, with the funds divided between city and county school systems based on average daily attendance.

The second agreement – the one the city has decided it will not renew this year – was adopted July 1, 2011 when officials consolidated two previous agreements into one document. One of those pacts, originally adopted Nov. 6, 1969 when the courthouse was rebuilt, pertains to one half of a percent of sales tax revenues being shared with the county, while the other, adopted originally March 10, 1992 after a countywide referendum, pertains to another one percent being shared.

Consequently, with the city’s decision to not renew the second agreement, the county would lose 1.5 percent of the city’s sales tax revenues it has been accustomed to receiving. City officials have said during their meetings that the cut would amount to approximately $642,000, but according to county officials, the impact will be far greater.

During the Fayetteville Board of Mayor and Aldermen’s January meeting, city officials voted to notify the county of its intentions via letter.

Having just received the letter, County Mayor Peggy Bevels discussed the matter with commissioners during Tuesday’s Lincoln County Commission meeting, saying the city’s decision will cost the county over $1 million.

“It’s a shock, and it’s a sad shock, because I thought we’d all get together and work it out,” said Bevels, noting that the last time the agreements were up for renewal, the two bodies negotiated, with the county deciding to half its hotel/motel tax with the city. “This is going to be very detrimental to our community,” she added.

“These agreements are very important to the county,” said Commissioner Steve Graham, chairman of the County Budget Committee. “I think the aldermen and commissioners back then (when these agreements were entered into) knew that most of the sales tax revenue was generated by county residents doing business in town.”

Graham went all to say that when you weigh the impact of losing that revenue with the county’s property tax rate and the other agreement, the impact would amount to 21 cents on the tax rate or $1.07 million.

“I’m disappointed in the city,” said Commissioner Bill Newman, going on to add that he’s been disappointed with the city on several fronts, beginning with the city’s establishment of a city high school, which he described as a mistake that has caused division among the city and county. “We can set here and not want to offend our friends … but I think we need help outside this body.”

“Over the years, these agreements were automatically renewed, and when there were problems, we’d sit down together,” said Commissioner Donny Ogle. “I’m disappointed we didn’t have that opportunity.”

Other commissioners cited endeavors, some of which they city and county have partnered in and others that each picked up the ball when perhaps the other didn’t.

While the matter didn’t meet with any resolve during the meeting, officials are expected to address it further in budget.