Mobile taxpayers will continue to pay a one percentage point increase in the city’s portion of the sales tax for the next five years to support repaving roads, fixing ditches, improving parks, installing lighting, and other capital improvement projects.

The City Council voted unanimously to extend the so-called “penny tax” increase through 2028, as a way to continue providing approximately $36 million each year to finance capital improvement projects.

Related: Mobile City Council looks to extend penny sales tax and Capital Improvement Program

The vote also increases the annual amount that goes to each of the seven council districts to address drainage, road paving, and other capital projects. For the next five years, an additional $4 million each year will be generated from the 1 percentage point sales tax first initiated 13 years ago. That amount is up from $3 million under the previous plan adopted in 2018.

“Every city councilor realizes that huge benefits have accrued to the citizens in transportation, mobility, and drainage,” Mobile Mayor Sandy Stimpson said. “The response we get from our citizens is very positive.”

Sunset the tax

Indeed, the vote occurred with little discussion and no public outcry over extending the sales tax.

But that doesn’t mean city officials are not thinking about whether to sunset the tax increase after the next sunset date, five years from now.

The council’s actions represented an extension of a sales tax increase that first went into effect 13 years ago.

The tax hike was first voted on in 2010, as a temporary solution to the city’s budget crisis during the height of the Great Recession. Two years later, a sunset clause was added, and the city’s portion of the sales tax rate was increased from 4 to 5 percent. Mobile’s overall sales tax rate is 10 percent (5 percent to the city, 4 percent to the state, and 1 percent to Mobile County).

“Anything is possible,” said Councilwoman Gina Gregory, who was the swing vote in 2010 that ushered in the tax increase for the first time. “The reason we (included a) sunset in the first place was to enable us to roll it back and not have the extra penny. We can roll it back when we don’t need it. And if we pay off (the city’s) debt, we may not need the tax anymore.”

Councilman Ben Reynolds agreed and advocated for having the penny sales tax re-examined within three years.

“I want to do away with the tax as soon as we can,” he said.

Stimpson, who once opposed the tax in 2014, said he believes the increase is “teed up to work” because it funds capital projects.

“No one likes a tax,” he said. “That’s why we put in the sunset clause on it for five years. If it’s not satisfying to the public, they have their opportunity to assert their influence on the city council to say that we’re not getting the benefit out of it and to stop it. That was the sole reason to put in that sunset date.”

Focus on capital

For now, city officials are pleased with what the tax increase is doing. The council’s action authorizes a financing mechanism for a Capital Improvement Plan (CIP) that was ushered in 2015 and has been the main program in which the tax hike has supported.

Since then, the sales tax increase has generated little – if any – controversy.

“The truth is capital improvements have been neglected for so long in this city that we are now face with major infrastructure problems,” Reynolds said. “There has got to be a way to fund it. But I would hope that within the next five years, we are able to make enough progress, retire enough debt, and fully fund police and fire pensions so we can roll it back. At that point, we can fund capital improvements from other (revenue) sources.”

The sales tax proceeds, according to the council’s actions, will be dedicated to the following:

• $4 million will go each year to the seven council districts. That is an increase from $3 million annually that had been in place since 2018.
• $4 million for municipal buildings, infrastructure, and other citywide capital expenses.
• $4 million into funds for city infrastructure and other capital expenses in federal Community Development Block Grant eligible areas within the city’s limits. The program that is administered by the U.S. Department of Housing and Urban Development is aimed at providing funds for programs in moderate-to-lower income neighborhoods.
• Additional money goes toward city capital projects, city matches for grant-funded capital projects, and to pay down debt service.

Reynolds said he initially wanted the council to consider increasing the amount each council district was set to receive, from $3 million under the previous program to $5 million. He said that his district doesn’t benefit “as much” from the CDBG funding than it would from a direct appropriation to his district.

Reynolds, though, said he is pleased with the current structure of the overall program.

“My priorities, which are resurfacing roads and fixing drainage issues, have existed for a long time,” Reynolds said.

Other council members said the money will go a long way toward addressing basic city services, like paving roads and fixing ditches.

“It’s a great opportunity to do a lot of projects,” said Councilman Cory Penn. “We have a lot of drainage issues, and roads that need paved. It’s an extra $4 million a year to work on projects in our district. It’s a great opportunity for our constituents because they want to get these type of projects done.”

Gregory said the city’s recent annexation of areas west of the city limits will also be vying for the revenue generated by the tax. She said residents in some of those areas, which have been annexed into her Council District 7, are asking for traffic control features like speed bumps and lighting.

“That $1 million doesn’t go too far when considering how much these things cost,” Gregory said. “And with annexation, we’ll have more people and more areas (to manage).”

Gregory, though, is pleased with how the tax increase has been handled since the controversial days of its implementation.

“This is something tangible and you can see progress being made in these districts,” she said, referring the to the CIP. “Before, it was more operational in just trying to provide services. The prevailing though (in 2010 and 2012) was if we don’t do something to shore up the budget, we can’t send police and fire out and we’d have to cut these departments. You can’t pick and choose what you want to cut.”

She added, “Now, it’s more infrastructure related. People can see where that extra penny is going.”