The city would be better off replacing the 20 percent, or penny, sales tax increase with a 10 mill increase in property taxes and charging a fee for garbage collection, a citizens’ ad hoc committee on taxation recommended to the Mobile City Council Tuesday.
Committee member Quin Hillyer, a conservative writer, told councilors the recommendations would relieve some of the tax burden on the “working poor,” while also encouraging job creation. The recommendations would also help lead to more long-term revenue stability for the city, he said.
In a report released during the regularly scheduled council meeting, the committee recommended a $7-per-month garbage collection fee, which would raise $8.5 million in revenue, and the property tax increase, which would bring in about $19 million.
In the report, the committee points out that Mobile’s 10 percent sales tax rate is more than three percentage points higher than the national average and higher than of cities outside Alabama viewed as Southern regional competitors.
The report states those rates range from 9.25 percent in major Tennessee cities to 8.5 percent in Charleston, South Carolina; 7.5 percent in Pensacola; and 7 percent in Biloxi. Also listed in the report is Norfolk, Virginia, which has a population of less than 250,000 and a sales tax rate of 6 percent.
In the report, committee members point to an Institute of Taxation and Economic Policy study that shows sales taxes “are the most regressive” form of taxes, with “poor families paying almost eight times more of their income on these taxes than wealthy families and middle-income families paying five times more.”
The report also states sales taxes are much more volatile than property taxes because, according to a U.S. Census Bureau report, median home values have increased in every decade from 1940 to 2000.
“Even despite the great recession of 2008-09, median home values today are greater in constant 2000 dollars than they were in 2000,” the report states.
Mobile and Mobile County also has among the lowest property tax rate nationwide, according to the report.
“Of 1,833 counties in the United States with populations over 20,000, 1,626 of them feature higher real-estate taxes as a percent of median home value,” the report states. “In actual dollars, the median Mobilian pays less than residents of 1,509 out of the 1,833 counties.”
The increase in the property tax would add roughly $79 dollars to the tax bill of the average homeowner, after taking the homestead exemption. In addition the $7-per-month garbage fee is less than twice what Montgomery and Huntsville charge, the report states.
The $19 million per year raised from the property tax would be set aside for capital infrastructure improvements and would be split among the seven council districts, Hillyer said, similar to the restrictions currently put on the sales tax increase.
The property tax increase and the garbage fee combined with continued savings from the city and an increase in revenue from employers like Austal, Airbus and the Mobile, Alabama Cruise Terminal would equal about $34 million in revenue per year, Hillyer said. The sales tax increase brings in about $28 million to $32 million each year.
The city must hold a referendum on a proposed local amendment in order to enact the recommendations, according to the report. Committee members also suggested making the recommendations renewable every four years and compared it to the county’s “pay-as-you-go” program for infrastructure issues. A proposed local amendment would also provide for a 4 percent cap on the city’s sales tax.
The committee, which is chaired by Councilwoman Bess Rich and also features Councilman Levon Manzie as a member, will come back before council in a couple of weeks.
Hank Aaron Stadium upgrades
A $110,000 re-allocation to pay for more improvements to Hank Aaron Stadium once again raised questions about the BayBears lease of the city-owned stadium from Rich.
The money will be used to deal with a drainage issue and to repair a portion of the speaker system, but comes in addition to nearly $500,000 in repairs to the stadium almost a year ago.
During a pre-conference meeting, Rich questioned why the city was putting that much money toward helping a private entity that was behind on its rent.
“There are a lot of private businesses in town that we don’t underwrite,” she said. “It doesn’t make sense. It’s out of bounds and it’s out of whack.”
Mayor Sandy Stimpson’s Chief of Staff Colby Cooper admitted the BayBears were still $175,000 behind on rent, but added they had made a $25,000 rent payment this quarter and, because of a deal currently in place, would get current once the city met its obligations to make the stadium Southern League compliant.
Rich complained that, so far the city had spent $450,000 on stadium upgrades and had only received $25,000 back.
“They’ve paid rent, that’s all I can say,” Cooper told her. “That’s an improvement over where we were.”
Councilman John Williams disagreed with Rich and accused her of overly scrutinizing two things — BayBears and MoonPie Over Mobile — that have among the largest return on investment in terms of quality of life.
“We spend more money on other facilities that don’t match up,” Williams said.
Councilman Fred Richardson said the city’s obligations to Hank Aaron Stadium shouldn’t be contingent upon what the BayBears choose to do.
“We own the BayBears stadium,” he said. “We are obligated to keep our property up. This is $110,000, not $1 million. I think this is a cheap fix.”
Stimpson said he recognizes the BayBears contract is an issue for Rich, but added he was willing to take a chance with the city’s current agreement with the owner.
“We will address it if he doesn’t do his part,” Stimpson said. “We’re in a position where we need to fix the stadium. It is ours and we need to make the best of it.”
This story was updated at 6:24 p.m. on Tuesday to correct the amount the BayBears owe in back rent.