Gardendale considers tax hike
The city of Gardendale is considering increasing sales taxes by 1 percent.
Gardendale City Council members heard the first reading on Monday of an ordinance that would hike sales taxes from 3 percent to 4 percent.
If the ordinance passes, sales tax on items in Gardendale would increase from 9 cents to 10 cents per dollar. Currently, merchants pay the state of Alabama 4 percent, Jefferson County 2 percent, and the city of Gardendale 3 percent of their gross sales.
The ordinance is expected be on the agenda for the city council’s Oct. 4 meeting. If adopted, the tax increase will be in effect from Nov. 1, 2010, to Nov. 1, 2014.
The additional tax would be earmarked for three items: A capital improvement fund to be used exclusively for the Gardendale-Martha Moore Public Library expansion program; a debt retirement fund to pay off the city’s long-term debt; and an economic development fund to be used for recruitment of new and expanding business, construction of municipal infrastructure, granting incentives and acquiring property.
Gardendale Mayor Othell Phillips opposes the tax increase. He said the city’s financial committee — consisting of Alvin Currington, Faith Harper and Peggy Tumlin — proposed the increases.“I do agree with the majority of the recommendations of the finance committee except for this recommendation,” Phillips said. “The city has over $6 million in reserve funds, and I can’t in good conscience vote for a tax increase at this time.”
Currington, chairman of the finance committee, said $1.5 million in the city’s reserve fund is earmarked for certain projects. For example, money from gas tax can be used only for road construction, and income from traffic tickets can be used only for police and court expenses.
That leaves $4.5 million in the fund.
Currington added that “reserve fund” is a misnomer, because the reserve fund is actually the city’s general fund from which operating costs are withdrawn.
“Today, we have $4.5 million in the city’s coffers to operate,” Currington said.
He said if the city does not pass the 1-percent tax, the $4.5 million would decrease to about $1 million by 2014.
“We’re spending more than we’re taking in,” Currington said. “Our only real options are to do what we’ve been doing, which is nothing, or to do this (collect the extra tax).”
The financial committee is recommending the increase because the members are looking at Gardendale’s long-term needs, according to Currington.
He said Gardendale is paying more than $1 million a year on debt payments on three major projects: The Gardendale Post Office, Gardendale Civic Center and the Odum Road expansion project.
“There’s no doubt these were the right thing to do,” Currington said, “but the decisions to do those projects were made in a different economic climate. That’s what’s draining our city.”
Currington said none of the additional tax revenue would be used for the city’s operating expenses, but would be used solely for library, debt retirement and economic development.
“This is not meant to increase the city’s revenue,” he said. “This is meant to be a catalyst to do those three things. If done properly, it will, for the long-term, stimulate the economy.”
Currington said the tax is expected to generate $9.5 million during the four-year window in which it would be collected. Of that, $1 million would go to the library expansion project the first year, with the library receiving none of the funds the remaining three years.
Almost $4 million would go to debt retirement over four years, which Currington would get the city completely out of debt.
The remainder would go to the economic development fund. If the city does generate the expected $9.5 million in four years, more than $4.6 million would go to economic development. If spending in Gardendale does not meet expectations, the economic development fund would get the shortfall.
Phillips and Currington both pointed out that the city has cut the budget by more than $900,000 in the past two years in an effort to deal with the economic recession.
More details about the proposed tax increase can be found at www.cityofgardendale.com.