Former Starkville alderman Emmett Smitherman, left, encourages the board Tuesday to "be cost-effective" in its budgeting and clear in its explanations of citizens' property tax payments. The board voted 5-2 to increase property tax millage by two mills, partly to offset the $1.1 million sales tax revenue shortfall caused by the COVID-19 pandemic. The city might also delay its debt payment for a year, which would save $575,000 but could harm the city's credit rate for borrowing money in the long run. Photo by: Tess Vrbin/Dispatch Staff
September 2, 2020 10:53:37 AM
Starkville aldermen voted 5-2 Tuesday to raise property taxes by 2 mills in the Fiscal Year 2021 to offset an anticipated $1.1 million budget shortfall.
City sales tax revenue in FY 2021 might see a 12-percent drop, marking an $880,000 decrease from this fiscal year, after the COVID-19 coronavirus pandemic started limiting business and social activity in March. City expenses are expected to increase by an additional $200,000 from the first-year payment on a lease/purchase agreement for the Starkville Police Department's body cameras.
The anticipated $540,000 in revenue from 2 additional mills would only cover about half of the projected shortfall.
"We certainly never anticipated a pandemic that would put us in a position to have to raise millage just to keep on functioning," said Mayor Lynn Spruill, who has expressed support for the millage increase since it was proposed in August.
The FY 2021 budget, passed by the same 5-2 margin, also includes $3 million to match the $12.66 million grant the city received last year from the U.S. Department of Transportation to revamp a mile of Highway 182. Ward 2 Alderman Sandra Sistrunk previously said the city expected at least a 1-mill increase to match the grant.
Mills are used to calculate property taxes, and the city determines each year how many property tax mills to levy. For a $100,000 home with no homestead exemption, the 2-mill hike -- from 28.13 to 30.13 -- would increase the owner's taxes by $20. For commercial properties, it would increase taxes by $30 per $100,000 in assessed value.
The fiscal year begins Oct. 1.
Aldermen Ben Carver of Ward 1 and David Little of Ward 3 voted against both the tax increase and the budget. Both said at the Aug. 18 meeting that their constituents were concerned about making ends meet if the city raised taxes.
Little said Tuesday that he would prefer the city find ways to save money, such as keeping some vacant jobs open or waiting a year to buy new police body cameras, instead of raising taxes.
"It's a tough year for our businesses, it's a tough year for many people who have been impacted in a negative way, and we've seen firsthand this year that the city of Starkville lives and dies by sales tax revenue," Little said.
Tax increases over several years
This is Starkville's third year in a row raising millage -- increasing it by 1.05 in 2018 and 1.5 in 2019 -- but the city still has a lower-than-average millage rate in Mississippi. Columbus has a millage rate of 51.24.
The millage increase for FY 2019, from 25.58 mills to 26.63 mills, primarily funded a boost in parks and recreation spending. Last year's increase to 28.13 mills funded pay raises for some city employees and some new equipment for various city departments.
Taxes in Starkville have increased cumulatively by about 20 percent over the past 11 years, even though they have not increased every year, and some of those increases have come from the county and the school district, not the city, said Sistrunk, the board's budget chair.
Former alderman Emmett Smitherman said during the public hearing for the budget that the current city administration collects $2.1 million more in property taxes per year than it did at the start of the term in 2017. He said including the county and school district in the explanation of tax millage to the public could be misleading.
"I just want to encourage you to take a good look and just be cost-effective in what we're doing because there are things we can change and do better," Smitherman said.
Stanley Miller, who spoke at the Aug. 18 meeting, told the board again Tuesday he thought a tax increase was "premature" now that Mississippi State University students have returned and most businesses have reopened. The city only has one chance per year to change its millage rate, Sistrunk said.
Ward 7 resident Alvin Turner said at the Aug. 18 meeting that the board should be careful about levying a tax increase, but Tuesday he said he understood the need for it.
Ward 5 Alderman Hamp Beatty asked Sistrunk if the city could use its "rainy day fund," or leftover cash reserves at the end of the fiscal year, to help make up for the revenue shortfall, and Sistrunk said it would not be a wise move.
"We don't have enough money in that fund to carry us through the normal ebbs and flows of our cash flow," she said. "One of the things you need to evaluate when you're looking at dipping into your ending fund balance is whether you have those sorts of cyclical needs throughout the year, and we do."
The millage increase might not be the city's only means of countering the sales tax revenue shortfall. The city is also considering delaying its debt payment for a year, which would save the city $575,000, Sistrunk said in August. The delay would not affect the current interest rate but could harm the city's credit rate for borrowing money in the long run.
The aldermen voted 5-2, with Henry Vaughn of Ward 7 and Vice Mayor Roy A. Perkins of Ward 6 opposed, to hire a new water treatment operator for the utilities department. The position was exempted from the hiring freeze the city enacted in April as a cost-saving measure due to the expected sales tax revenue shortfall. The aldermen unanimously lifted the hiring freeze Aug. 18.
The city previously had only one water treatment operator and had been trying to fill the position for almost two years, utilities general manager Terry Kemp said.
"The qualifications that we're looking for ... are more certifications, more management experience, more ability to train and develop and use technology as we go forward," Kemp said. "This is what we've been shooting for, and we've tried not to take less than that."
Additionally, former alderman Jeremiah Dumas, the director of parking and transit services for MSU, gave the board an update on the Starkville-MSU Area Rapid Transit system's ridership during the nearly six months of the pandemic.
After the MSU campus closed in March, SMART ran one bus per route and allowed only half the capacity of each bus, Dumas said, but SMART buses still carried 14,500 riders between March 15 and Aug. 8.
"Those are 14,500 people that have no opportunity for any other type of transportation, (and) those people are just in the city," Dumas said.
The SMART system's 11 routes cover 62.2 miles, and 83 percent of that mileage goes between the city and campus or is solely in the city, he said.
Dumas told the board in January that SMART saw a 20.5-percent increase in ridership in 2019.
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