Loophole allows council to proceed without legislature
Leada DeVaney, Hartselle Enquirer
If a plan to hold a referendum on a 10-mill property tax increase fails to get legislative approval, a little-used loophole would allow the city to bypass Montgomery and go straight to the people.
Alabama law allows municipalities to hold their own property tax referendums if the sought-after increase doesn't push the city past a 12.5 mill limit. Currently, 5 mills of all property taxes in Hartselle go to the city.
The council could, without legislative approval, set a referendum to increase property taxes 7.5 mills and keep under the 12.5 mill limit. The increase would mean an additional $75 per $100,000 of property value.
The state-set limit doesn't include property taxes levied for the school system.
"If we were a city with a higher tax rate this wouldn't be possible," City Attorney Larry Madison said.
Hartselle currently has the lowest property taxes in the state.
The council had been wanting a 10 mill tax increase, with 7 mills going to the city and 3 mills set aside for future school construction projects. That plan hit a snag, however, when members of the local Legislative Delegation said they wouldn't approve a referendum without an unanimous request from the city council.
A public hearing on the 10 mill plan will be held at the Feb. 24 city council meeting, though council members concede the request probably won't be approved by the legislature.
That would leave the lowered amount as a more viable target.
Under a resolution proposed last week, the lowered 7.5 mill request would be split three ways: 2.5 mills for road construction and improvements; 2.5 mills for the city's general fund; and 2.5 mills for the school system.
The 2.5 mills for construction and improvements proposes using the money to pay for needed road work, as well as for matching grants from federal and state agencies.
The city's other slice of the pie, 2.5 mills for Capital Improvement Plans, would go towards projects approved as part of that initiative. The city adopted the CIP plan but there was no money set aside to fund the work.
The rest of the money would be used to finance a bond issue to help cover construction costs related to a new high school. That project could cost as much as $30 million.
The loophole would also allow the city to permanently earmark those funds, whereas there are questions as to whether a legislative-approved referendum would do so.
Time is also on the side of the 7.5 mill plan. While the 10 mill plan would have to be approved by the Legislature during its current session, the city can set the 7.5 mill vote as late as a month before the Aug. 24 municipal elections.
Knight said that resolution will be discussed at the council's next work session, scheduled for Feb. 23 at 6 p.m.