Blount County Commission rejects tax vote
By Joel Davis | (firstname.lastname@example.org)
The Blount County Commission will not pre-empt the City of Maryville’s plans to hold a Dec. 10 referendum to increase the sales tax in the city from 9.25 to 9.75 percent.
State law allows the county to hold a special election on a countywide sales tax increase, but commissioners decided to wait and see what happens with the city referendum. They discussed the matter during the Agenda Committee meeting on Tuesday.
County Commissioner Gary Farmer originally made a motion for the county to hold its own special election on the matter on Dec. 10 but changed his mind after Commission Chairman Jerome Moon brought forward information that the county could put the matter on the primary election ballot in May 2014.
“If we bring a resolution between Feb. 5, 2014, and no later than March 7, 2014, and the Blount County Election Commission takes action, they will have the authority to make those dates (of the referendum and the primary) coincide.”
Farmer withdrew his motion. “We’ll see what happens in December,” he said. “That will give us a time period in which to act.”
Commissioner Ron French made similar comments earlier in the discussion. “Let’s let Maryville have their election, and let’s wait and see how that goes, and then let’s put our question to the primary election, and it won’t cost us any more money because we’re going to have the election anyway.”
Commissioner Jim Folts had warned that assuming Maryville would pass the increase would be a big assumption. He also pointed out the failure of both a county sales tax referendum and a special called election on whether to levy a wheel tax in recent times.
“The citizens have voted on major new taxes twice in the last 10 months,” he said. “They have voted a resounding ‘no’ in both cases. What part of ‘no’ does this commission fail to understand? To put a major sales tax increase on a ballot for the third time in less than a year shows a total lack of respect for our citizens.”
Pay tax anyway
Farmer had originally argued that county residents would end up paying the increased sales taxes anyway. “We are going to be part of it whether we choose to be or not,” he said. “It has already passed in the city of Alcoa, and it will be put on the ballot in the city of Maryville on Dec. 10. Our citizens will be affected where we choose or don’t choose.”
Last year, Blount County voters shot down a proposal to hike the local sales tax rate from 2.25 percent to 2.75 percent following the approval of a similar measure in Alcoa in August 2012.
There were about 22,156 votes against the tax increase and 20,079 in favor.
During that referendum, the county had hoped to capture a portion — an estimated $2.3 million annually — of the increased sales tax revenues generated in Alcoa. The Alcoa hike went into effect in October.
Commissioner Mike Lewis said that county residents pay the bulk of the sales taxes in Alcoa and Maryville anyway. “(About) 100,000 (people) in the county are funding the sales tax increase of the city of Alcoa without us getting any benefit at all from that increase,” he said. “The only thing county citizens need to do is pass that same increase in the county to go collect that multiple sales tax increase for the cities that we are not getting now.”
In other business, the Agenda Committee voted to place two resolutions related to county debt on the Sept. 19 agenda. One resolution ensures county compliance with current federal tax policies and procedures. The other authorizes the issuance of about $171 million in bonds.
The county is looking at refinancing two bond issues through the Public Building Authority that account for about $168.9 million in combined debt between Blount County and Blount Memorial Hospital. Blount County is only responsible for about $77 million of the total.
The move could save the county and Blount Memorial Hospital $2.3 million during the next three years, according to financial advisors.
Folts raised some problems with the bond resolution. “We are authorizing non-callable bonds,” he said. “That is a potential problem because if we ever want to go to fixed rates, we’re stuck with these variable rate products.”
According to a presentation by the county’s financial advisor, PFM, the county is evaluating whether to refinance the bonds with floating rate notes, directly purchased by a bank. This option would eliminate liquidity fees, PBA fees and loan administrator fees.
The proposal could end up transferring risk from bondholders and bankers to the citizens of Blount County, Folts said. “The county is in the resolution agreeing to pay a higher rate of interest if the U.S. Congress changes the tax laws governing municipal bonds.”
The proposal would only reduce costs associated with the debt. It would not change the pay-off date or reduce or increase the principal.
According to earlier projections, county debt should be down to $204 million by the end of 2014 and $175.8 million by 2018. The county currently has about 46 percent in variable rate debt.
“The problem with variable rate stuff is you have to keep redoing it, and every time you redo it, it’s another $500,000,” Folts said. “Maybe we should bite the bullet and go to fixed rate bonds and get rid of these swaps.”