L.O.S.T. Wins, People Lose (For Now)

NEW SALES TAX PASSES, BUT WAIT A MINUTE—THE CITY WAS ALREADY SEEING EXTRAORDINARY TAX REVENUES, THANKS TO EXORBITANT GASOLINE PRICES

Behold the power of marketing. The campaign in favor of the increase in the Local Option Sales Tax (L.O.S.T.), backed by the Mayor, City Council, Chamber of Commerce, and all municipal departments, won by a 61% landslide on July 15. The pro-tax campaign had raised $62,000, over 85% of which came in the form of large donations from the City’s biggest companies, including affiliates of AFLAC ($10K), Synovus ($10K), the W. C. Bradley Company ($10K), Woodruff Holdings ($5K), St. Francis Hospital ($5K), J. Kyle Spencer ($5K), and Schuster Properties ($2K). This does not include the substantial influence of the Columbus Ledger-Enquirer, whose unabashed editorial to praise the tax increase was anything but the neutral coverage that befits the City’s primary newspaper. The campaign used a blitz of television spots, radio spots, billboards, and direct mail to convince the public that the tax increase was not really a tax increase, and that public safety would suffer if the people did not vote for it. The tactic succeeded, despite legitimate condemnation by the local chapter of the consumer watchdog group Common Cause.

In fact, the City would have received substantially greater tax revenues without pushing for this new tax. Read on.

The Local Option Sales Tax will add one cent to each dollar of sales in Muscogee County, not including automobiles or lodging. A similar proposal failed in 2004, winning only 40% of the popular vote. What was the difference? The Ledger-Enquirer quotes City Manager Isaiah Hugley as saying that “it boils down to his credibility,” referring to the Mayor. Not wishing to slight Mr. Hugley, who holds the toughest job in the City, but no, it boils down to $62,000 of marketing. That is why good sense lost this referendum.

The City has pledged to spend 70% of revenues from the new tax on public safety, including one hundred new police officers, who will benefit from a modest $3,000 annual bonus on top of their salary. The remainder will go to infrastructure and special projects.

The Georgia Conservative Republican Voters Coalition opposed the sales tax proposal for a simple reason: Accountability. While it is easy for the City to make great promises in order to sell its tax, it is a different matter to hold the City to its promises. The GCRVC believes that the City needed to make a stronger case, with safeguards against waste and abuse. Now that the tax proposal has passed, the GCRVC will keep a close eye on what happens to budget revenues.

The National Association for the Advancement of Colored People (NAACP) opposed the sales tax proposal for another simple reason: Equity, in addition to recognizing the City’s misguided diagnosis of the local crime problem. Here is a short comment from NAACP State Chairman Edward O. DuBose:

The mayor and members of Columbus Council are using scare tactics and deception to urge citizens to vote for a Local Option Sales Tax (LOST). They are playing to the fears of the community by trying to convince them that a vote for the sales tax is a vote to reduce crime, while at the same time using deceptive and misleading statements to persuade voters into believing that the LOST isn’t an increase in tax.

The LOST, if passed, would be an incredible burden on the middle-class and poor citizens in Muscogee County, while providing a break for big businesses like automobile dealerships and the hotel/motel industry (both exempt). The crime problem in Muscogee County isn’t because of a shortage of law enforcement officers. Instead it is a result of poor leadership not adequately utilizing the resources available.

Please, don’t be “hoodwinked” when you cast your vote on Tuesday.

EDWARD DUBOSE

President, Georgia State Conference NAACP

The GCRVC concurs with Mr. DuBose on all counts. However, we would like to add something else. Columbus is the third largest city in Georgia, but ranks 41st in violent crimes per capita (cf. the FBI’s 2006 statistics). The crime problem in Columbus is no emergency. Why, then, were we so desperate to raise our taxes?

Here is the big secret. High gasoline prices are a boon for the City. About half of sales tax receipts come from the gas pump. In fact, sales tax receipts rose 22.6% between the 2007 and 2008 budgets—with no new taxes. Bert Coker was right. The proof was in the budgets.

Every one-cent increase in the price of gasoline translates into a little more than $50,000 in the City’s tax receipts. Put another way, every one-cent increase in the price of gasoline pays for another city job. How many pennies does it take to pay for one hundred police officers? Do the math.

Using average gasoline price data available from the US Department of Energy, it turns out that 89% of last year’s increase in sales tax revenues (i.e., of $7.4 million) came from the increase in the price of gasoline. Here is a short history of sales tax revenues and average gasoline prices in this part of the country:

	L.O.S.T. revenue	Gasoline
2003	$29,730,531	$1.40
2004	$29,580,000	$1.61
2005	$29,892,000	$1.95
2006	$29,733,000	$2.52
2007	$32,760,000	$2.55
2008	$40,159,515	$3.14

The Mayor’s projection of sales tax revenues of $40.6 million (not including the new sales tax) in the current fiscal year corresponds to an average gasoline price of $3.88. If the average price of gasoline in the current fiscal year turns out to be closer to $4.00, the City will rake in over half a million dollars more than that. The tax proponents had to know that today’s expensive gasoline would mean substantially stronger revenues for the City budget, and that fact alone proves the point that Mr. Coker was trying to make all along. The City was going to see revenues skyrocket over those of previous years even without the tax, not only thanks to the influx of 3,000 new military families from Fort Knox, but also thanks to higher gasoline prices. Why, then, were we so desperate to raise our taxes? Now you know.

Nevertheless, it is too late now (behold the power of marketing!). Like an embarrassing tattoo that you discover after a night of overindulgence, the new tax is permanent. It will not wash off. Now all we can do is make the best of it. So let us make a commitment to follow it closely.

It is indeed true that 70% of revenues from this tax will go to public safety. That is not difficult. It is a matter of state law: The City must direct revenues specifically to the ends to which it had earmarked the tax in its proposal. However, for the sake of the City’s integrity and indeed that of Mayor Wetherington, the City must not proceed to cut back on current funding of public safety from the general fund. If it does, then the GCRVC will mount a campaign to reveal to the people of Columbus what happened and to hold the tax’s biggest proponents seriously to account.

To set the stage for all to be aware of the outcome, we must know what the public-safety budget currently is. The general fund is about 68% of the total City budget and is the source of the entire public-safety budget except E911 service. The general-fund budget that the Mayor recommended last April to the City Council projects receipts of $143.6 million this fiscal year (July 1, 2008, to June 30, 2009). The City projects the current sales tax (1%, in place since 1974) to raise about $40.6 million. The budget projects public safety to cost $80.8 million from the general fund. The City of Columbus currently has 431 police employees.

To estimate how much money the new sales tax will raise on behalf of public safety, we need do no more than examine the current 1% sales tax, in place since 1974. Since the new tax takes effect on January 1, 2009, while the fiscal year ends on June 30, we should expect it to raise half as much as the current L.O.S.T. Using the Mayor’s projections, that will come to $20.3 million for the current fiscal year, followed by well over $40 million a year thereafter.

From there, the math is simple. If 70% of revenues from the new sales tax go to public safety, then the 2009 public-safety budget, excluding E911 service, should increase by $20.3 million × 70% = $14.2 million, for a new total of $91.5 million (an 18% increase). In the meantime, of the 431 public-safety employees that we currently have, we should expect a rapid increase toward the 431 + 100 that the City has promised us. How long should that take? If we give the City until the end of the next fiscal year to reach its goal, then we should expect 431 + 100 = 531 public-safety employees on the job by June 30, 2010. Thus, if we see 531 new public-safety employees planned in next year’s budget, the City will have kept its word on that count. In turn, if we see a public-safety budget of at least $91.5 million next year, then the City will have kept its word on that count as well. Anything less is a broken promise. We will be watching.

Richard Voss