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Sullivan County panel asks Kingsport, Bristol to share sales taxes

June 5th, 2007 12:00 am by J. H. Osborne



BLOUNTVILLE - Some Sullivan County commissioners want Kingsport and Bristol to "do the right thing" and share local-option sales tax revenues from TIF projects.


TIF stands for tax increment financing, which has been approved five times for redevelopment projects in the two cities within the past three years.


The Sullivan County Commission agreed to those TIF projects, as did governmental counterparts in Kingsport and Bristol.


Doing so meant the county and each city agreed that any growth in property taxes paid on the properties would be diverted to help pay for redevelopment.


Looking back, some commissioners now think they acted in "ignorance" and should have investigated the county's options and leveraged the commission's authority - since the cities couldn't move ahead with TIF projects without approval from the County Commission.


Commissioner John McKamey has proposed asking the cities to share growth in sales tax revenue that results from TIF projects.


On Monday, the County Commission's Administrative Committee endorsed the move.


"It's the fair thing to do," said McKamey. "It's the right thing to do."


TIF is a winning proposition for developers, businesses and the cities, McKamey said. "The only loser is the general fund of Sullivan County."


McKamey said for the 2006 tax year, TIF projects cost Sullivan County more than $372,000.


While the cities recoup their forgone property taxes on TIF projects from new sales tax revenues, the county loses property taxes "but gets nothing back," McKamey said.


His plan: Ask each city to give Sullivan County's general fund 50 percent of the 50 percent of sales taxes that now go to city coffers.


Sales tax revenues are generated when money is spent on goods and services at businesses throughout the county and its cities.


When a consumer pays sales tax locally, it is sent to the state, which redistributes it back to the county and its cities based on collection site. Fifty percent of what is collected countywide is split among the school systems, based on average daily attendance. The other 50 percent is distributed back to the local governments, depending on where the taxes were generated. The city of Kingsport, for example, gets 50 percent of the sales taxes generated at businesses within the city, and Sullivan County gets 50 percent of the sales taxes generated at businesses in the non-incorporated areas.


Commissioner Mark Vance said McKamey's proposal might be met with "indigestion" from the cities, especially if the county asks for sales tax revenues to be split on the already approved TIF projects.


Vance said the issue has the potential to drive a wedge between the local governments and hamper future efforts at cooperation, including additional redevelopment projects.


Commissioner Sam Jones said the proposed sales tax sharing would have no effect on developers and businesses, so it should not be a detriment to economic development opportunities.


Vance said any disagreement between the county and the cities would, however, "set the tone."


McKamey said the policy of sharing sales tax revenues generated by TIF projects has been used across the state, with some locales dedicating the growth in sales tax to a particular public project such as a new jail.


An official with a statewide county officials group "didn't know why on earth" the county "hadn't done this before," said McKamey.


The Sullivan County Commission agreed earlier this year to give up more than $1.12 million in property taxes to secure construction of a Cheddar's restaurant and a new BB&T Bank in Bristol, Tenn.


The Bristol City Council already had agreed to give up more than $1.3 million in city property taxes for the same redevelopment project. The property owner still will pay the combined $2.42 million in taxes, but the money will be redirected to the Bristol Housing and Redevelopment Authority to help pay for the new restaurant and bank facility.


The Cheddar's and BB&T project in Bristol is the fifth commercial development project in the county to be approved for TIF.


Others include:


•East Stone Commons, at Eastman Road and East Stone Drive in Kingsport.


•Westridge, a former Wal-Mart site on West State Street (US 11-W) in Bristol.


•A property on Volunteer Parkway in Bristol where a new Lowe's and a new Food City opened.


•Crown Point Shopping Center on Eastman Road in Kingsport.


"Those five projects will exceed $500,000 in lost tax revenue per year for Sullivan County," McKamey said. "And over a period of 15 years will cost all Sullivan County taxpayers, both inside and outside of the municipal boundaries, approximately $7.5 million."


City property owners pay both city and county property taxes.


The Crown Point project is under construction. A project's TIF status is added to the tax rolls once construction is substantially complete.


County property taxes are collected by the county trustee's office. When taxes are paid on a property with TIF status, Sullivan County Trustee Frances Harrell sends part of the money to whichever local redevelopment authority was involved in the project's financing.


For 2006 county property taxes, Harrell has said the following taxes were redirected for TIF:


•$192,470.83 to the Kingsport Housing and Redevelopment Authority for East Stone Commons.


•$137,409.47 to the Bristol Housing and Redevelopment Authority for Lowe's/Food City on Volunteer Parkway.


•$42,566.26 to (BHRA) for Westridge.


The Cheddar's/BB&T project approved by the County Commission last month will add another $74,898 per year to the list - for 15 years. The Bristol City Council agreed to redirect $70,431 per year in city property taxes for 18.5 years.


Vance at first "passed" on the committee's vote on the issue but changed that to the only "no" from the eight-member group.


McKamey's proposal to ask for a split of sales tax revenues from TIF projects will be on the agendas of the commission's Executive Committee Wednesday at 6 p.m. and Budget Committee Thursday at 7 p.m. It could come for a vote by the full commission on June 18. All three meetings are scheduled for the Commission Room on the second floor of the historic Sullivan County Courthouse.


For more information about county government, including how to contact commissioners, visit www.sullivancounty.org.



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