The sales tax increase was proposed by Mayor Philip Craighead earlier this year and would increase the citys local option sales tax from 2.25 to 2.75 cents. That increase would bring the total sales tax to 9.75 cents for Lebanon residents, the highest allowable amount in the state.
Craighead said in a full year, the projected tax increase would amount to $3.5 million. Huddleston said they should split that amount in percentages in order to replenish the Rainy Day Fund, which the city has been budgeting from to cover a deficit, and into a fund to improve street paving and flooding issues.
Obviously, the first priority is balancing our budget, said Ward 5 Councilor Haywood Barry.
The city has been budgeting around $2 million in the past several years from its Rainy Day Fund to cover a shortfall in revenues compared to expenditures. For the 2012-2013 fiscal year, Craighead said the city budgeted $2.75 million from the Rainy Day Fund. However, he noted the city will only use $500,000 of the $2.2 million budgeted from that fund last year.
City Attorney Andy Wright presented a draft of a resolution to state where the sales tax increase would be spent, but noted it was a loose statement of goals and objectives.
Huddleston said instead of saying council will use half of the revenue from an increase to balance the budget they should instead return half of the increase to the Rainy Day Fund. He said if the resolution stated the revenue would be used simply to balance the budget, it gives future councils an amount they can automatically spend, instead of being conservative with expenditures.
Ward 3 Councilor Rob Cesternino noted the revenue from the sales tax increase in the first year would only be $1.75 million because the increase wont take effect until halfway through the fiscal year.
Thats not even enough to balance the budget, Cesternino noted.
Council agreed the point of laying out where the money would be spent is to instill confidence in the citizens that the money will be responsibly spent. They discussed many drainage problems and areas of concern during the work session that could be improved with the increase in sales taxes.
Also, council noted paving local streets was a major priority as well. Huddleston proposed using 25 percent of the increased revenue for drainage and 25 percent for paving. However, Commissioner of Public Works Jeff Baines said it would be easier to put 50 percent in one fund and say that can only be used for paving and drainage issues.
Wright said the city receives one check at the end of the year from the state for its sales tax collections. He said if Commissioner of Finance and Revenue Russell Lee can split the amount the increase generated, it would be possible to divide the funds as council indicated.
Cesternino said putting revenues from the increase back into the Rainy Day Fund shows citizens the city is being more responsible and cant absorb future deficit-spending through a tax increase.
It sends the message if we do any deficit spending its going to be known and not hidden and absorbed through a tax increase, he said.
Ward 1 Councilor Alex Buhler and Ward 6 Councilor Kathy Warmath did not attend Wednesdays work session citing scheduling conflicts. They said they needed more notice about the session. The work session was first mentioned at the Sept. 4 regular council meeting and a notice was sent that it would be held on Sept. 11.
After noting the scheduling conflicts, the work session was changed to Sept. 12.
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