BIRMINGHAM, Alabama -- The Birmingham City Council Tuesday morning is set to vote on an ordinance to extend the city's extra one cent sales tax for another five years.
The tax was originally proposed and passed during former Mayor Larry Langford's administration in late 2007.
The increase was part of Langford's plan to fund improvements in police, fire, street and sidewalks and fund a new scholarship program. The city's sales tax rate is now 10 cents on the dollar.
The council in 2007 also passed Langford's proposal to double the city's business license fees to fund mass transit and build a domed sports stadium.
While a majority of council members have expressed support for reauthorizing the sales tax, they have agreed with Council President Roderick Royal, who suggested setting an expiration date for the extension, rather than extending the tax indefinitely as originally proposed by Mayor William Bell.
"I'm supporting we do a sunset date to allow us to go back," Royal said. "It might be a bargaining tool for future councils to keep businesses and residents in the city. If we can give people relief, we ought to give them relief."
Royal said forecast improvements in the economy, coupled with the promised economic gains from major city-funded initiatives such as the downtown hotel, entertainment center and baseball stadium, justify reviewing city revenue in five years and revaluating the tax.
The gains could offset the need for the extra cent, Royal said.
At least five council members, including Royal, Valerie Abbott, Johnathan Austin, Jay Roberson and Kim Rafferty support the five-year extension rather than the permanent extension.
The tax would expire in December without council action. The extra cent tax brings in about $33 million to the city. Tom Barnett, the city's finance director, stressed the importance of extending the tax.
"If we didn't have it, we'd have to do some serious cutting," Barnett said. "It creates somewhat of a red flag with our bond issue on the chance it wouldn't be extended."
The city is in the process of going to the bond market to get $75 million of the $150 million in cash for capital projects, following a voter-approved October referendum.
Barnett said the five-year term would not hurt the city's status with bond rating agencies.
Abbott added that the city must also take steps to gradually wean itself from the extra cent in preparation for its expiration in five years. Otherwise, the expiration date is meaningless.
"The council's going to have to go on a diet, and we're going to have to ask the mayor to go on a diet," she said.
Much of the sales tax money did go to increased funding for departments, but major goals of the doubled business license fees, designed to improve mass transit and finance a domed stadium did not materialize.
While business license fees are not on today's agenda, council members have questioned the city's right to collect fees for purposes other than their intent. The planned scholarships from the sales taxes were also abandoned, and the long-touted dome from the business license fees remains a shelved concept.
However, both taxes and fees were used to prop up the city's budget during the economic downturn, officials have said.
While the council may argue over whether it's right to leave the increases in place or remove them, there's no legal reason the city can't continue to collect, the city attorney said.
While the council raised the taxes and fees for certain projects, the word ''intent'' in the ordinances makes the spending nonbinding. In addition, assistant city attorney Jim Stanley said the final legal documents passed by the council lacked language requiring the money to go anywhere besides the city's general fund.
"It was not tied to the list in the council's ordinance of intent," Stanley said. "There was never a legal designation."
Source: http://blog.al.com/spotnews/2013/02/birminghams_penny_sales_tax_in.html
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