City Could Reconsider Sales Tax Hike

By Bill Dries

Just days after voters in Memphis and unincorporated Shelby County voted down the idea of a half-cent countywide sales tax hike, there was renewed talk at Memphis City Hall about a citywide sales tax hike.

Memphis City Council member Shea Flinn confirmed a “brief conversation” with Memphis Mayor A C Wharton Jr. on the WKNO-TV program “Behind The Headlines.”

“The Memphis-only tax that we were planning … could come back up in six months,” Flinn said on the program hosted by Eric Barnes, publisher of The Daily News.

The program can be found on The Daily News Online,

A citywide sales tax hike would go on a special election ballot sometime in 2013, which otherwise would be an off-election year for voters in Shelby County.

Flinn proposed and the council approved such an item for this month’s ballot, which was pre-empted by the Shelby County Commission’s passage of a resolution for a countywide sales tax hike referendum.

The council and Wharton had intended to use the revenue from a city sales tax hike to reduce the city property tax rate for the fiscal year that starts July 1, among other things.

“If we are going to have a special election there are some costs associated with that. We are going to have to do a cost benefit analysis on what the probability of our success would be,” Flinn said. “The City Council could just send a letter to the (Shelby County) Election Commission saying we want to reactivate the ordinance we have already passed.”

Steve Reid of Sutton-Reid, the marketing agency that worked with opponents of the countywide sales tax hike, said the ballot proposal failed with voters not necessarily because it was a tax hike. By state law, half of the revenue from a countywide sales tax hike was required to go to local education in general. And Reid argued proponents left the uses for education general despite suggestions but no commitments that it would be used to expand pre-kindergarten programs.

“We haven’t seen the deep cuts that the unified school board is going to make. And we need to see them make those cuts first,” Reid said on “Behind The Headlines.” “We’ve merged the schools now and now it’s time for the school board to put on their big boy pants and come to the table and make some deep cuts … to get that budget as low as possible.”

The proposed sales tax hike was paired on the ballot with a proposed 1-cent city gasoline tax whose revenues would have gone to the Memphis Area Transit Authority. Voters rejected both proposals, although the gas tax lost by a closer margin than the sales tax did.

The sales tax hike was heavily backed by the group Stand For Children, which heavily backed several countywide school board candidates who won in the August elections.

Because of the backing of Stand For Children, Flinn said he was surprised by the vote margin but not by the defeat of the question.

“It’s a verdict on the burden of proof,” he said. “Anytime you are asking the public to raise taxes, on themselves effectively, the burden of proof is on the proponent’s side to explain why that is good.”

But Flinn differed with Reid beyond that.

“There was a bright line guarantee in state law,” Flinn said. “State law guaranteed that 50 percent of the sales tax collected … would go to education. … What those education purposes were was where the opposition quite effectively created confusion.”

Flinn also thinks despite no specific commitment from the school board before its budget season begins, the revenue would have gone to pre-kindergarten programs.

Before the countywide sales tax hike went on the ballot, Wharton had indicated he might propose some city funding for pre-kindergarten programs outside the merged school system that begins operation in August. The city’s obligation under state “maintenance of effort” laws to fund the Memphis City Schools system ends when the merger begins.

Wharton, like Flinn, was initially an opponent of the countywide sales tax hike. But he became a proponent with the promise that all of the $30 million in revenue from the sales tax hike for education would specifically go for “universal pre-k.”

Wharton had even secured a legal opinion from the city attorney’s office about how to “recall” such a tax hike if half of the revenue did not go to pre-kindergarten.

The legal opinion held that the only way to recall the tax hike would be for the Shelby County Commission to put another referendum item on the ballot specifically asking voters to undo the tax hike.