City to County: Share the Wealth

Marion City Council members made their case Monday night that the McDowell County Board of Commissioners should reconsider their method of apportioning sales tax revenues. They say the change has cost the city about $500,000.
Commissioners wonder what the city can offer in exchange.
City Council and County Commissioners met in a special joint meeting in the commissioners' boardroom to discuss the matter. Mayor Everette Clark attended by telephone. He was at home recuperating from illness.
Mayor Pro-Tem Steve Little opened with conciliatory remarks.
"I am convinced we all have the same goal;" he said, "to do the best for the people we serve in McDowell, in Marion, in Old Fort and in all the surrounding communities."
He said the financial matter the council wished to discuss was of the utmost urgency and that he hoped to inform commissioners of the city's dilemma and to learn from the commissioners' perspective.
"Hopefully," he said, "even if we disagree, we can do so without being disagreeable."
He acknowledged that the county has the power to determine the method by which the sales tax revenues are distributed, but said the ad valorum method adopted in April of this year had led to a serious budget crisis for the city; one that jeopardized the city's ability to provide basic services.
The county decided to change from a per capita method (based on population) to the ad valorum method (based on tax levy) due to the fact that the latter financially favors the county.
City Manager Bob Boyette gave a detailed presentation of the new system's impact on the city budget. He said the new method would deprive the city of about $500,000 in fiscal year 2008-09. He added that the closing of Swift-Galey and Spectrum this year, taking into account water and sewer revenues and personal property tax, had led to a shortfall of $132,581.
The combined impact of both lasses was in excess of $640,000 per year, or about 9.7 percent of the city's general fund.
Boyette added that between 2/3 and ¾ of taxable sales occur in the city of Marion, but that the city receives only 9.25 percent of the revenues under the ad valorum method of distribution, down from 13.7 percent under the old per capita method.
Councilors proposed the county adopt a quarterly calculation by both methods and split the difference with the city. In other words, the county would be "almost certain" to gain an increase of $250,000 annually and the city would lose at least that amount.
In Boyette's proposal he said the county would receive "full reimbursement for the current impact of the 2003 annexation of the two prisons, to the tune of $160,000" as well as other concessions.
"The city will gladly continue partnering with the county on water and sewer extensions of mutual benefit outside the city," said Boyette.
He concluded by proposing the arrangement be drafted as an interlocal agreement with a term of 10 years "as soon as possible," and said that, absent this arrangement, the city's ability to provide services for fiscal year 2009-10 is at stake.
Mayor Clark added that the city provides services to properties that are tax exempt, including churches, schools, and both city and county buildings. He said the renovations to the waste treatment plant would cost over $6 million and the uncertainty about revenue was so severe that the city was unable to plan future services and upgrades.
County Manager Chuck Abernathy pointed out that the county had unfunded mandates from the state to pay for, including the public schools and the community college.
He said the annexation of the prisons took a thousand citizens, and associated tax base, into the city and away from the county. He said this had "made the change (in revenue distribution) desirable to the county."
He added that it would be unacceptable for the county to sit by and do nothing while the city was in crisis, but that the change had been "a limited and appropriate response" to the city's annexation of the prisons.
Councilman Lloyd Cuthbertson said the annexation had been prompted by the state's proposal to build a laundry operation at the prison. He said the annexation had enabled the city to provide the further incentive of offering city water and sewer rates, and that the move would have benefitted all. That the state has not followed through was not the city's fault.
Clark spoke of the city's history of extending water and sewer to the industrial park in order to attract business, even when businesses said they would not come if annexed.
"We were trying to help improve the livelihood of all (inside and outside the city)," he said, "and that has been the spirit of the city. Everything we have done has been for the love of the people."
Commissioner Michael Lavender took exception to that comment.
"I'm not going to get into who loves the citizens more," he said. "That was a kind of back-handed slap, and I won't pretend I didn't notice it.
"The uncertainty issue is moot," he continued, "because revenues are uncertain for the county, too."
He said the city's annexation of Eastfield, Finley Road and Tate Street had cost the county an annual loss of about $275,000, which more than made up for the split-the-difference agreement the city wanted to make.
Lavender pointed out that the city had increased outside water and sewer rates again, despite the fact that the county had paid the bulk of the cost of extending the lines to Nebo.
"The county invested in extending the lines for what is, in effect, a revenue source for the city," he said, "and then you turn around and raise the rates.
"It's true that you lose money (under the new system) and that we stand to gain," he said, "but that's not illegal or inappropriate. We had that option."
Commission Chairman Andrew Webb expanded on the disparity of water rates. He said the minimum rate for a county customer was $29.85, compared to $11.95 in the city.
"If a customer used 4,000 gallons beyond the minimum, in the county he'd pay $47.85," he said. "In the city it would cost just $19.95.
"That's real hard to explain to a customer in Nebo," Webb stated, "who just got on the line and right away had his rates go up."
Little countered that the taxpayers of the city were ultimately responsible to pay for the system, and that council had an obligation to maintain financially sound management. The rate hikes, he said, were necessary and in keeping with the trend in other municipalities across the state.
He added that he had learned a great deal in the evening's discussion. He said that every action of either board affected the other. "Like it or not," he said, "we are dependant on each other."
Lavender stated that just as the city had to maintain the water and sewer system, the county had solid waste disposal to manage, which loses money every year. When the city charged county water customers such high rates, "that's an incentive for them to be annexed, and then we lose even more revenue."
He said he did not see what the city was offering in exchange for the arrangement they were requesting. "What can we present to the citizens of the county that they stand to win in this? Water rates? A change in annexation policy? Recruitment incentives?" he asked.
Boyette responded the county would gain $1/4 million in revenues and a non-competitive cooperation with the city.
Lavender said the money the city was asking for was the county's money and letting the county keep half of it was not a concession.
Abernathy stated that the county was concerned about the city's financial condition. He said the commissioners needed to study the figures and that the two boards should meet for further discussions.
There was general agreement to that. It was decided that Abernathy and Boyette should confer and that the two boards would try to meet again in December.