Tennessee Advisory Commission on Intergovernmental Relations (TACIR) Report on Internet Sales Tax Distribution:
A summer study was conducted by TACIR examining the distribution formula of Internet sales taxes and other revenues. Due to the South Dakota vs. Wayfair decision by the Supreme Court, the sales of goods and services on the Internet are subject to distribution as previously enacted by the Streamlined Sales and Use Tax Agreement, and will now be modified. With the decision, it allows further development and equalization of tax revenues.
The TACIR issued a draft report in February 2019, indicating a potential conflict between cities and counties as to a new formula for greater distribution to counties. Further complications could arise if this impacts the distribution of funds for educational purposes, and reduces funding for municipal schools. The impact of school vouchers is also still unknown. The City and School administrations have consistently opposed using public funding for voucher programs. If approved with the state subsidy following the student, there is a question of school impact. Does the school have to accept the student? If so, does the cost of maintenance-of-effort change? Does the community have to provide additional facilities? Many questions remain to be answered. If percentages are realigned between cities and counties for sales taxes on the Internet, what transpires with the reduced entity, particularly if affecting cities?
Proposed Environmental Management Disposal Facility and Impacts on Oak Ridge:
During discussions with the Tennessee Department of Environment and Conservation (TDEC) and the Environmental Management (EM) Division of the U.S. Department of Energy (DOE), the proposed landfill will require a Record of Decision (ROD) among the DOE, TDEC, and the U.S. Environmental Protection Agency (EPA). The City of Oak Ridge is not “at the table” and is dependent upon the decisions of these bodies with respect to a prospective landfill. The City Council has stated its concerns to the agencies formally on December 10, 2018. Millions of cleanup dollars are involved, with numerous issues impacting Oak Ridge that need to be resolved NOW, before the ROD is signed by TDEC, affecting Oak Ridge for the next 200 years.
The City of Oak Ridge faces potential Clean Water Act impacts caused by DOE’s cleanup and demolition. In our comments, the City has requested an exemption from demolition impacts along Bear Creek and the East Fork of Poplar Creek. The City believes a waiver of any exceedances/violation caused by demolition should be granted by TDEC. Non-normal substances such as mercury may exceed City wastewater permitting standards, but known as to cause and source.
A financial assurance reserve fund for the existing DOE landfill was established by TDEC’s 1999 ROD agreement with DOE; and DOE is currently required to pay $1 million annually into the fund. As the second landfill is considered, we believe a reserve for the second landfill should also be required by the State of Tennessee. At the present $1 million per year contribution rate, we believe this is low for any potential hazard that could occur. For instance, a re-mining of a DOE site in Mound, Ohio exceeded $65 million, significantly more than the $20 million in reserve for DOE’s existing landfill, and which has taken 20 years to accrue. This is critical concern, so immediate actions can be taken without funding delays.
Current Legislation Updates:
The City of Oak Ridge continues to absorb the elimination of the Hall Income Tax over six years. In the third year, the City will see further elimination of a total $750,000. Sales increases due to DOE activity and new retail activity have helped. However, DOE’s Uranium Processing Facility (UPF) activity will decline in five years, so new growth continues to be required to offset eliminated revenues. Quick response by the Tennessee Department of Economic and Community Development (ECD) is essential with state incentives to ensure aggressive progress.
The Legislative Delegation is asked to continue to include support and funding for a new airport in Oak Ridge. Approvals have been received at local levels and airport plans have been forwarded to the Federal Aviation Administration (FAA) in Washington, D.C. agencies.
Edgemoor Road is now in the Transportation Improvement Plan (TIP) at the Transportation Planning Organization (TPO). We continue to push this project, which is in preliminary planning phases. The Legislative Delegation ensured inclusion of this project, but it will take additional inquiry on a consistent basis to ensure it is a top priority in the regional plan that competes with Knoxville and Knox County. Ongoing monitoring with Tennessee Department of Transportation (TDOT) is requested.
Tourism grants have been received for improvements to: (1) directional historical site signage; and (2) electrical improvements at the Rowing Venue. Project One is ready for implementation with the Convention and Visitors Bureau. Project Two is presently under design with the Electric Department.
The City of Oak Ridge received an allocation for a Gateway Project at the entry to Oak Ridge near the Solway Bridge. We are presently coordinating with the State Highway Department for a license to the site and beginning a design. This is a $500,000 project which purpose is to provide a noticeable arrival point when entering Oak Ridge due to the distance to the more built-out commercial centers.
Blankenship Field has been a challenging project that incorporates a $500,000 TDEC grant for stadium turf improvements. Significant work went into the “paperwork” and grant process. The project is now under construction. Implementation was complex and a TACIR review is strongly suggested to determine how to make such a process more efficient for Tennessee cities, large and small. The City is facing similar concerns in the public expectation of a swift CSX rail project implementation.
Sales Tax Study by the City of Oak Ridge:
The City has recently sold $13.5 million in bonds for the construction of a new school and a senior center, both public facilities. Prior to this, the City has sold $8 million in bonds for energy improvements to public buildings. The City has borrowed money through the State Revolving Loan Fund for utilities and paid sales taxes on the construction services under contract.
If the City had a Construction Division, no taxes would be paid on supplies and labor. The new school/senior center will pay roughly $650,000 in sales taxes with 7/9ths going to the State. With interest costs over a 25-year bond, the City will pay an additional $338,000 in interest.
Comparisons to other states reveal a system, such as used in Alabama, Louisiana, North Carolina and West Virginia, which would allow an exemption of local governments from sales taxes on buildings and structures that are to be leased or owned by a local government. This analysis is a work in progress and we will continue to share such comparisons. At present, a TACIR study is requested to look at the vast amounts of interest that local governments are paying for sales taxes on public improvements and buildings.