City budget not yet balanced

Friday, May 7, 2010

With no plan for a property tax rate hike, Lewisburg leaders face a budget with proposed spending greater than revenues and the shortfall is more than $373,000, City Hall officials have explained.

"We've taken our basic expenditures - salaries and utilities and such, and we're short," City Manager Eddie Fuller said Wednesday as he reviewed the agenda for Tuesday night's meting of the City Council.

"That's where we're starting out," Fuller said, deferring to City Treasurer Connie Edde for more specifics.

Lewisburg's annual budget expires on June 30. It now totals $9.7 million, Edde said. As currently drafted, the spending plan that would start on July 1 is at $8,632,000, less than what was adopted last summer, but more than current calculations on revenues which are projected at $8,258,600.

"That's my expectation," Edde said.

This overview comes more than a week after Marshall County commissioners voted to ask the Election Commission to schedule a referendum on increasing the local option sales tax rate. Consumers now pay a total of 9.25 percent in sales taxes. The local option part of that rate is 2.25 percent. The proposal is to increase it by one half a cent to 9.75 percent, or nearly 10 cents for every dollar spent. There's a complicated exception, but the referendum sought on Aug. 5 is to raise sales taxes by half a penny.

"I don't see the citizens voting themselves a raise in sales taxes," Fuller said.

"If the referendum did pass" on Aug. 5, the city manager continued, "it would relieve some of our financial shortfall.

"But by July, we'll have a budget passed," Fuller said, indicating that much of the shortfall might be made up from reserves, instead of a sales tax increase that had not passed yet. "However, we're like everybody else, looking for places to cut and save.

"Our sales tax revenue projections are down maybe $200,000," he said.

Meanwhile, Edde points to Nashville where the Tennessee Municipal League (TML) reports that Gov. Phil Bredesen has proposed a plan to deal with the state's $105 million budget gap between revenue and spending.

The idea is to raise the limit on sales tax charges on so-called big-ticket items. Boats and other such purchases for prices exceeding $1,600 are subject to sales taxes that are not at the full rate.

In other words, the sales tax on something bought, for example, for $10,000 is subject to the state sales tax of seven percent. The local option sales tax, which is 2.25 percent here, is applied only to the first $1,600 of the purchase price. However, the second $1,600 of the $10,000 price is subject to a state sales tax of 2.75 percent, the TML explained. The remaining $6,800 of the $10,000 product is not subject to any sales tax.

That tax break may end, and the state might not share the increased tax revenue with towns or counties.

Since the TML newsletter, Tennessee Town and City, reported the plan on April 26, Bredesen's press secretary, Lydia Lenker, was asked if that proposal to lift the sales tax cap is still a viable plan as the state's budget is formed.

"The cap-lifting plan is not off the table," Lenker said Thursday. "Gov. Bredesen has proposed a plan to address the budget shortfall and he's now awaiting the Republican proposal."

So, that's become a concern for Edde. Meanwhile, Marshall County leaders have said if the state takes some sales tax revenue that local governments might get, then a local sales tax hike wouldn't impact consumers here if the state increased the tax anyway. That would, however, deny sales tax revenue for the local governments.

Lewisburg's Council is to convene at 6 p.m. Tuesday in City Hall, 131 E. Church St., where a vote is scheduled on the city's property tax rate. It's now $1.36 per $100 of assessed value. That rate imposes an annual property tax bill of $340 on a house valued at $100,000. The county rate is now $3.09. That rate charges a $772.50 property tax bill on a $100,000 home.

"I think our Council is pretty firm," the city manager said. "We're not going to raise property taxes."