City stands to earn $1 million if sales tax referendum passes

Thomas Wilson
A referendum to raise the county-wide sales tax one-half cent could mean big dollars to the county government -- and bigger dollars to the Elizabethton city government.
The referendum on the Feb. 10 county primary ballot asks citizens whether they want to raise the county-wide local option sales tax from 2.25 percent to 2.75 percent. If county voters pass the sales tax increase for Carter County, approximately $700,000 of additional revenue will be brought into the county.
If voters approve the one-half cent sales tax increase, the city is estimated to take in an additional $1.066 million.
"If it is countywide, the city would get their pro-rated share," said Bradley Moffitt, city director of finance. "We're going by the sales tax of what was received last year."
The referendum would also mean additional dollars for Carter County Schools and Elizabethton City Schools. Moffitt estimated the city system would receive $200,000 while the county schools would pick up an additional $525,000.
The city government collected approximately $2.5 million in sales tax revenues during the 2003 fiscal year, Moffitt said.
Moffitt said the city's school system received roughly 27.6 percent of sales tax created by the local option revenues generated by the city and county. On a county-wide tax system, half of local sales tax option dollars must go to school systems within the county. "They split based on the prior years," he said.
If the referendum passes, the sales tax revenue would likely go into the city's general fund. How the new dollars would be allocated would be at the discretion of the City Council, Moffitt said.
Additional funding dollars would be a needed shot in the arm for the city. City administration has submitted and the City Council has voted to approve yearly budgets with double-digit spending cuts. Through the month of November for fiscal year 2004, the city reported collecting $1,012,419 in actual local option sales tax revenues. That figure is roughly $16,000 below budgeted revenue numbers.
If voters approve the referendum, the Carter County overall sales tax rate will increase from 9.25 percent to 9.75 percent. The Carter County Commission voted 15-6 on Dec. 8 to place the referendum on the Feb. 10 ballot.
The Tennessee General Assembly voted to raise the state sales tax one percent to 7 percent during the 2003 legislative session. A city or county can have a local option sales tax rate capped at 2.75 percent under state law.
The local option increase could also bring additional tax dollars to the city of Johnson City, which extends its corporate boundaries into Carter County. Hawkins, Greene and Unicoi counties presently have the highest local option sales tax rates of 2.75 among the 8 counties of Northeast Tennessee. Johnson County, at 1.5 percent, ranks as the lowest local option tax in the upstate followed by Hancock (2 percent), Sullivan (2.25 percent), and Washington (2.50 percent) counties.
Two referendums placed on the ballot for Elizabethton citizens to raise the city's local option sales tax by a half percent failed during the mid-1990s. Washington County voters are also facing a sales tax referendum to up their local option rate from 2.5 percent to 2.75 percent. If approved, both counties would have the highest sales tax rates allowable under state law.