Editor,
I am disappointed in the lack of information being provided by the newspaper and the city administration on the issue of the 7/8 cent local sales tax that is on the ballot. Thank you for allowing me the opportunity to shed some light on the issue.
Up until now the only reason given for the city council to want to have this issue placed on the ballot is because there are some other cities in the area that have a 2 cent city sales tax and the city of Gentry thinks they deserve some of that too. I will try to provide information on the most basic questions that need to be asked.
How much would be raised?
Approximately $400,000 to $500,000 a year would be a fair estimate. So, for comparison purposes, let's stay with the lower number of $400,000.
How much would it cost the average taxpayer?
Let's start by making a generous assumption that only half of the new taxes will be paid by the people living in Gentry and the other half is paid by people from out of town shopping in Gentry. That leaves $200,000. Divide by the population of Gentry, 3,158, and you have an estimated tax burden of $63 a year for every man, woman and child living in Gentry. Just the added cost of the new tax on your utilities alone, like water, trash, electric, gas and telephone will raise your utility cost about $5 a month in the average household or $60 a year. I think a very conservative estimate of the tax burden of the new tax for a family of four would be between $150 and $400 a year, depending on how much you make and how much you spend.
Who would be helped by the new tax?
We really can't tell because the city has provided no information on what the money would be used for.
Who would be hurt?
Families -- Sales tax is known to be the one tax that hurts families the most and especially lower-income families. Because local sales tax is collected on all food, services, utilities and other necessities and since lower-income families have to spend most of their income providing the basic necessities, it has a much greater negative impact on a family living on $20,000 a year than it does on a family living on $100,000 a year with a lot more disposable income. So, generally speaking, the less you make the more it hurts.
Local business -- Currently, a local business has an advantage over a business in a surrounding city with a higher tax rate. A lower tax rate gives local citizens an incentive to purchase goods and services at a lower price than the same priced goods or services in a city with a higher tax rate. It also gives incentive to citizens from towns with a higher tax rate to come to Gentry to shop.
The two groups that would be harmed the most by the new sales tax increase would be lower-income families and local business.
Does the city need it?
I don't know. The city of Gentry has not come right out and said they need it and, more importantly, they haven't said what they need it for. Generally, when a city seeks to increase sales tax, this is the first information given to the public.
You also have to remember that the city sales tax is not their only source of income. The city has about 10 sources of income as compared to the average household or even the average business that usually has only one or two sources of income.
Does it ever go away?
No. This is one of the major differences between other cities' sales tax and ours. In Gentry, if this tax is approved, all 2 cents city sales tax would be deposited into the general fund to be spent on what ever the city council decides it wants to spend it on. This tax stays forever and never goes away. In other cities part of their sales tax is designed to go away.
Siloam Springs, for example, has a 2 cent city sales tax. One cent is dedicated by law for paying for capitol improvements, 3/8 cent is for electrical improvements and 5/8 cent is for paying off sewer plant improvement bonds. The 3/8 cent will go away automatically 10 years from the date it started and the 5/8 cent will automatically go away when the bonds are paid off. So in 5 or 10 years Siloam's city sales tax will drop back to 1 cent.
Springdale also has a 2 cent city sales tax. One cent of that is dedicated by law to paying off road improvement bonds for projects that were presented to and approved by the public. Once again, when those bonds are paid off, the tax automatically by law goes away and their city sales tax returns to 1 cent.
This is exactly the method Gentry used to build the library. The city asked the voters to approve a $945,000 bond and pay for it with a 1/2 cent city sales tax. We paid off the bond in 4 1/2 years and the tax automatically went away.
The situation the city is creating with this sales tax proposal is that in 10 years or so when other cities' sales tax goes back to 1 cent, Gentry will be left with the highest sales tax rate in Northwest Arkansas.
Even though I am no longer in city government, I still expect my local government to act responsibly. I do not believe our city leaders have justified the need for a sales tax increase. I personally will be voting against the 7/8 cent sales tax. However you choose to vote, I hope I have given information that will help you make an informed decision. Thank you for your time and please get out and vote.
Wes Hogue
Gentry
Editor's note: Following is the limited information which was published regarding the proposed 7/8 cent tax increase. From May 7 issue of the Eagle Observer: "With all council members present but Warren Norman, Gentry council members in attendance at Monday's meeting unanimously approved on their first readings ordinances to put a sales tax increase of 7/8 of 1 cent before the voters in November.
According to Mayor Kevin Johnston, the sales and use tax increase is being requested because of the many projects which the city needs to complete but lacks necessary funding. Johnston told council members that Gentry's tax rate is and has been, for some time, less than most neighboring cities. He said most cities collect 2 cents on every dollar, but Gentry only collects 1 and 1/8 cent per dollar.
"I can't think of a fairer way to pay the cost for ambulance service in the city," said councilwoman Janice Arnold, saying it would be better to tax all who do business in Gentry for the ambulance service than to raise property taxes.
The city has been paying an annual fee to Siloam Springs to provide ambulance service in the city, and that fee continues to rise to meet the cost to Siloam Springs to provide the service to Gentry.
Gentry City Council, in March, approved a memorandum of agreement with Siloam Springs, agreeing to pay Siloam Springs $25,000 for ambulance services within the city limits of Gentry for the current year. The memorandum says "the City of Gentry recognizes the need to create a built-in escalation mechanism for payment and will work toward providing a per household formula from which to calculate the payment in year 2016 and beyond."
With approximately 1,275 households in the city, annual costs for ambulance service could be near $83,000 if calculated at $65 per household, according to Johnston.
The first ordinance levies the additional 7/8 cent per dollar, subject to voter approval. The second ordinance requests that the special election to approve the tax increase be held in conjunction with the Nov. 4 general election."
June 4 issue: "Passed on a second reading were two ordinances relating to adding a 7/8 cent sales tax to current sales tax collected by the city. One was to approve the tax increase and the second was to schedule it to be on the November ballot for voter consideration."
July 9 issue: "Also to be on the ballot in November will be a measure to increase the city's sales and use tax by 7/8 of one percent to make it an even 2 percent tax. The state levies 6.5 percent and the county, 1 percent. If approved by the voters in November, the total sales tax rate in Gentry would be 9.5 percent, with 2 cents on every dollar going to the city sales tax.
The council approved the third readings of ordinances to levy the tax and to call for a special election, held in conjunction with the general election in November, for voter approval of the tax increase.
Siloam Springs, Gravette, Highfill, Bentonville and Rogers all collect a 2 percent city sales and use tax, and some cities collect more. Decatur collects 1 percent.
Editorial on 10/29/2014