Alabama city considers raising sales tax: ‘Not any secret that we need more funding’
Residents and shoppers in Helena may soon pay more for items bought in the city as leaders consider a sales tax increase.
Council members are discussing a proposal to raise the tax rate by one cent, making the total sales tax rate 10 cents on the dollar. Leaders could take action later this month.
The move would generate about $2 million more annually for the growing city that also has an expanding debt load.
“Helena has been a growing town for the last 20 to 25 years and we’ve grown in rooftop and population, but the commercial has not kept on pace with that,” Councilman Chris Willis told AL.com. “For the citizens to get the amenities that they are hoping for and accustomed to, they are going to have to pay for it.”
The city is one of the fastest-growing areas of the Birmingham metro. While the rate of growth has slowed a bit, since 2020 the city has added more than 1,200 people, according to recent U.S. Census figures.
The city currently charges a 4% sales tax, adding to the state 4% and Shelby County’s 1%. The city budget estimated its sales tax collection to be about $5.6 million for FY 2024.
The proposal comes while city finances are under scrutiny. An audit showed Helena ended the last fiscal year with an $11 million deficit largely due to construction of a $45 million project to build a new city hall and sports complex.
The audit conducted by Birmingham-based accounting firm Dent Moses also showed that city spending in all categories last fiscal year exceeded budgeted amounts.
Overages in spending included:
- $1.1 million for general government,
- $1.3 million for public safety and
- $1.2 million for parks and recreation.
Mayor Brian Puckett has said the audit represented a snapshot of a financial situation that has since passed.
Puckett called the deficit an accounting issue rather than an actual crisis because city reserves were restored when construction bonds were sold.
Those figures are not represented in the audit because that transaction occurred after the report was completed, Puckett has said.
Willis attributed the problem to the city’s accounting software, which he described as antiquated and in need of replacement.
Still, council members have said action is needed to ensure Helena is able to pay for debt associated with major projects as well as other obligations.
“We’re managing ok, but it is not any secret that we need more funding,” Willis told the council during a work session Monday evening where he presented the tax proposal.
Sungho Park, a University of Alabama professor of public policy and administration who examined city finances for AL.com in April, cautioned that the fast-growing suburb should consider restraint in spending.
Park also found that the city’s long-term liability is high-risk.
Several council members noted that while they were physically conservative, the penny increase was a simple way to bring needed revenue into the city.
“I’m not a pro tax guy. I’m a common sense guy,” Willis told AL.com. “Nobody wants taxes, but you want amenities, and they are not free.”
The sales tax increase would put Helena in line with its neighboring cities that already have a 10-cent sales tax rate.
“We’re never going to have the same commercial tax base as our neighboring cities, but we can at least collect at the same rate as our neighbors,” Willis told AL.com.
Helena has a population of more than 22,000 people. The city has added more than 5,000 new residents since 2010, according to estimates from the U.S. Census Bureau.
The city is bordered by Pelham, Alabaster, Bessemer and Hoover, each with interstate access that Helena does not have.
“Helena is convenient to all that, but we don’t have the same amount of traffic coming through,” Willis said.
The new tax would begin 30 days after the council approves the ordinance.
“It’s a smart move. It brings us to par with the communities around us,” said Councilman Andy Healy. “We’re going to do something to bring in some revenue.”
Councilman Hewy Woodman was the only member to voice trepidation over the proposal and called for more information before voting.
“I would need to see more urgency on the need of more that would make us act ahead of time,” he said during the meeting.
The council also is mulling a potential property tax increase.
Other efforts to manage finances
While a majority of council members are united in favor of the sales tax increase, the panel is divided over a proposal to change the way the city pays its bills.
Mayor Puckett this week invited council members to come once a week to receive a detailed briefing on invoices and checks going out.
He also noted that the council already receives financial information and votes to approve spending, mostly unanimously.
“I just want to make sure we all stay lock step with the factual information,” Puckett said as he presented vote tallies that went back more than two years.
Willis and Council President Alice Lobell objected to the plan, saying it created a burden on operations.
“I think this is a knee-jerk reaction,” Willis said. “By the time this goes into effect, this council will have three months left.”
Options under review could include three signatures with the mayor, city clerk and a city council member or dropping the mayor altogether by requiring just a council member and the clerk.
Joseph maintained that her proposal was solid and simple.
“It would add another level of accountability, not only for this council, but future councils, and if they don’t want it then they take it back,” Joseph said.
New city leaders are coming to city hall after the August municipal elections. Mayor Puckett is not running for a second term and only two council members, Healy and Lobell, are seeking to remain.