NE Mississippi towns look for revenue alternatives

Staff Writer

As their bread and butter tax continues to struggle, cities and towns across the state will continue to push for revenue alternatives. But the Legislature isn't likely to budge anytime soon.

That comes as for the third straight month, the majority of towns -- 59 of 94 -- across northeast Mississippi kicked off the holiday shopping season with tax revenues on October retail sales falling below the same month last year. In the Golden Triangle area, only Macon and Artesia showed an increase. Starkville, West Point, Columbus, Caledonia, Crawford, Sturgis, Shuqualak and Aberdeen all saw declines.

Among the top shopping destinations in the region, the three big cities in the Golden Triangle were joined by Oxford, Louisville, Booneville and Kosciusko in seeing lower revenues. In the region's other major retail centers, Amory, Corinth, Grenada, New Albany, Pontotoc and Tupelo all saw increases. Of those, only

New Albany's growth topped 5 percent.

Starkville's numbers were down only slightly, from $580,649 last year to $579,095 this year. Columbus' decline was more significant, from $774,293 to $763,564. In West Point, where the city still is paying back each month an overpayment from two years ago, the number was down from $184,046 to $162,585.

Statewide, the overall return to cities was down from last October. And since July, overall revenues to cities are up a meager .3 percent against the previous year.

The numbers are significant because sales taxes make up between 40 and 50 percent of operating revenues for most towns. When the numbers remain flat for an extended period, it puts pressure on city leaders to reduce services or raise property taxes, the other major source of local revenue.

Neither are palatable options, especially over a period of more than one year.

Stagnating revenues mean fewer police, less street paving, reduced public works crews and no pay raises for city workers.

"You can only stand so much for a long period of time. I know legislators say to cut spending or promote growth but that's hard to keep doing year-after-year without some help. You can get taxes too high to attract growth," said Columbus

Mayor Robert Smith, who also sits on the Mississippi Municipal League board.

"We've talked in the past about things like special local option sales taxes to help pay for infrastructure, raising the diversion to cities, video cameras to help monitor stoplights, lots of different things. They haven't happened and I don't get any sense the Legislature is going to change now," Smith continued, referring to a few of the many ideas the MML brought up previously.

Columbus tried the videocamera idea six years ago, generating about $50,000 in revenue in four months before the Legislature banned them. Many other states, including Alabama and Tennessee, do allow them.

The other two options would be taxing all internet sales, which would require changes in the nation's interstate commerce laws or a lottery, with part of the revenues being funneled back to cities and towns.

Of the two, the lottery is the most likely, but state lawmakers favor dedicating revenues to education or infrastructure with cities and counties low on the priority list.

The other options include funneling some of the existing internet sales tax revenues to cities and counties for infrastructure work. Another possibility is increasing the sales tax diversion rate to the cities from 18.5 percent to somewhere between 20 and 22 percent.

Currently, businesses in a city collect the state's 7 percent sales tax and send it to the state, which in turn returns 18.1 percent of that total back to the city. MML Executive Director Shari Veazey is hopeful, despite the limited successes the group has had with revenue measures during the years.

That includes the 30-year effort to get the local-option tax for major capital projects.

"We feel like we've gotten more support for the increased diversion, especially if we will dedicate all the increased revenue to water, sewer, streets ... infrastructure. I just wish I could say for sure we are going to get there," Veazey said.

Another proposal pushed by the MML, which represents the state's towns and cities, is a change in the use tax. Currently if a person orders something online from Lowe's and has it shipped to the Lowe's store near their home and picks it up there, the sales tax charged on the item goes to the state with none diverted back to the city.

The MML wants that changed.

"We don't have any idea how much that might generate, but it would be something and it wouldn't be a tax increase on anyone," she explained, noting "no one likes to raise taxes."

Ultimately, the issue boils down to how much raising the diversion, changing the use tax or any of a variety of other revenue-sharing changes would impact the state's general fund, which already doesn't have enough money to go around.

On the other hand, cities -- large and small -- are feeling the pinch.

"The reality is, our towns have to have more revenue. They've been making difficult decisions for a long time and they have very limited ways they can generate revenues. They have responsibilities to meet, too. A number of our members this year had to raise property taxes after not do ing it for a long time," Veazey noted, echoing the Columbus mayor's perspective.

But will anything happens this year? Probably not says state Rep. Jeff Smith, the Columbus Republican who chairs the influential House Ways and Means Committee through which almost every piece of major legislation must go.

"Nope," he said simply when asked about the prospects for any of the MML's proposals.

The House and Senate leaderships first priority is revamping the state's education funding formula.

Almost everything else will be put on hold until that is done, Smith says.

Next will come Medicaid.

Everything else will line up afterwards.

"The choice of the increase in the diversion aren't good. I won't say impossible, we've done some crazy things before, but given all the needs, I just don't think the chances are very good, as my mother used to say, somewhere between slim and none," Smith stated, acknowledging the Legislature should have gradually increased the diversion periodically since it was first set at 18.5 percent in 1992.

A lottery is a good possibility this year but not a certainty and if it does pass, the funds will be used to shore up the general fund, Smith says, adding, "We've got too many needs there."

But all is not lost.

Despite not being able to tax all internet sales, Amazon and a few other companies are collecting taxes on sales to Mississippi consumers and sending the revenues to the state. Those numbers are somewhere between $50 million and $100 million and continuing to grow, Smith explained.

Some legislators want to dedicate 50 percent of that total to state highways and bridges to supplement a fund that has been falling further and further behind for years.

Of the remaining money, 25 percent would go to cities and 25 percent to counties for infrastructure, particularly streets and bridges.

That would relieve at least some of the debt service and day-to-day maintenance funding pressures.

But it may just be a step.

"So much needs to be done in the state that has been put off and put off because it is difficult," Smith stated. "We really haven't done anything for cities, that's true. I say if we leave Jackson after these
last four years and haven't done anything for roads, some people are going to get beat," Smith continued, referring to the House and Senate elections next November.