By Jared Felkins

Since a half-cent sales tax increase is on the ballot for voters to decide in the Nov. 6 elections, it’s important for voters to know exactly what types of taxes residents pay, how much money each generates and how the money is used.

The Wilson County Commission is required to create and manage the county budget to fund schools, the sheriff’s office, Wilson Emergency Management Agency, roads, the county court system. All of the services and departments are funded with four main sources of money collected through taxes. They are property, sales, wheel and adequate facilities taxes.

School operations are funded by about $56 million in local taxes. About $85 million of education funds come from the state, and about $11 million comes from the federal government. About $7.6 million is funded through fees for school lunches and after-school care.

Annual debt service payments, which are primarily for education, are funded by about $30 million in local taxes.

The sheriff’s office and jail operations cost about $23 million. About $2 million is funded by the state as reimbursement for housing state inmates and other small items. About $21 million is funded by local taxes.

WEMA operations cost about $13.6 million. About $2.2 million is funded by ambulance fees and $2.7 million in state-shared revenues. The remaining $8.7 million is funded by local taxes.

Road department operations cost about $12.3 million. Of that, about $6.7 million is funded by local taxes.

Schools, debt service, the sheriff’s office, WEMA and the road department make up about 85 percent of Wilson County’s total budget expenditures.

State law says budgeted local revenue must be equal to or greater than the previous year’s budgeted amount, unless the average population decreases.

It prevents local governments from reducing local funding and replacing them with state funds. This is commonly known as “maintenance effort” and/or the “supplanting test.” If maintenance of effort is not achieved, the state funding can be withheld from the county.

Also, the sheriff may not get less money for personnel than the prior year without his permission. Elected officials are generally constitutional officers, and they have the authority to sue in chancery court to have their offices adequately funded.

“I want to dispel the myth that we just can’t take a scalpel and cut the budget without pretty dire consequences,” said Wilson County finance director Aaron Maynard. “The misperception is that we can just reallocate funds and make it work. The state set it up to prevent this from happening. For example, when the state gives us an increase in the education budget, they intend for us to use it for education and not to reduce what we’re contributing by an equal amount.”

Sales Tax

Since voters will decide on a half-cent sales tax increase next month, let’s explore it first. While the Wilson County Commission can raise other taxes with a majority vote, sales tax adjustments require a public referendum.

Wilson County’s sales tax rate is currently 9.25 percent, and the proposal is to raise it to 9.75 percent, which is the highest rate a county can set by law.

The difference in the sales tax increase would equal an extra nickel for every $10 spent by someone buying goods and services in Wilson County.

Of the current 9.25-percent sales tax rate, the state gets 7 percent, and Wilson County gets to keep 2.25 percent. During the last fiscal year, sales tax accounted for about 9 percent of the county’s revenues.

Sixty of the state’s 95 counties currently have a sales tax rate higher than Wilson County. Forty-nine or nearly 52 percent of counties in the state have a 9.75-percent sales tax rate.

By comparison to surrounding counties, Wilson County’s 9.25-percent sales tax rate sits on the low end. It’s higher than Cannon County at 8.75 percent. It’s the same as Trousdale and Sumner counties. It’s lower than Montgomery County at 9.50 percent and Rutherford, DeKalb, Smith, Robertson and Williamson counties at 9.75 percent.

The general purpose school fund is the county schools operating budget. It is used for operational expenditures of the county schools. For the fiscal year that ended in June general purpose school fund received about $14.1 million.

The Lebanon Special School District receives a proportionate share of the sales tax dedicated for education based on student population as compared to the student population in county schools. During the last fiscal year, the LSSD received about $4.1 million.

The special purpose tax fund and rural debt service fund together received about $9.5 million. The funds are primarily used to make debt payments for elementary and middle schools.

By law, the first half of the sales tax is dedicated to education. The second half of the sales tax is dedicated to the city in which the sale took place.

For example, a business in a city collects and remits $1,000 in sales tax. The state would get about $757. The remaining $243 is split with half to educational services and the other half to the respective city.

A half-cent sales tax increase would generate an increase of $11 million in additional revenue annually with $5.2 million granted to Wilson County and $5.8 million granted to the city in which the sale took place or the Lebanon Special School District.

“Wilson County’s portion would provide the additional funds needed for the future county jail and our growing county’s infrastructure,” said Maynard.

If voters don’t approve a half-cent sales tax increase in the Nov. 6 referendum, funding for several upcoming projects will have to come from somewhere, and there are effectively about three choices that would remain.

Aside from sales tax, Wilson County’s primary sources of revenue come from property tax, adequate facilities tax and wheel tax. On the Nov. 6 election ballot, voters will decide on whether to raise the sales tax rate from 9.25 percent to 9.75 percent, which is the highest allowed by state law. If the proposed sales tax increase fails, the Wilson County Commission will likely raise one or a combination of the three other taxes to pay for projects such as a jail expansion and to build and expand schools due to growth. To generate the same revenue as the half-cent sales tax increase, property taxes would be raised by 15 cents, the wheel tax would increase to $33 and the adequate facilities tax would go from $3,000 to $3,561.

Property Tax

Wilson County’s property taxes are the primary funding source and generate the most money each year. Property taxes last year generated more than four times the amount raised by the other three taxes combined.

“Property owners are consistently asked to bear the burden of increased taxation,” said Wilson County finance director Aaron Maynard. “There are two primary reasons this happens. Property tax revenue is the most stable form of revenue. It is not subject to volatility in the economy, including declining real estate values. Most other revenue increases, including increases in the sales tax rate, are subject to being voted on by the people living in the county [through referendum]. Perhaps the most important reason to consider sales tax as opposed to property taxes or others is that this tax affects the broadest base of people. All citizens, tourists, and people simply passing through Wilson County are equally subject to the tax. An increase in sales tax does not penalize property ownership.”

The current Wilson County property tax rate is $2.5189. The property tax rate is set annually based on the needs of the county.

In the current budget year, 1 cent of property tax will raise $407,000 in revenue, according to Maynard. The amount changes annually based on the value of the properties in the county.

Maynard said property taxes would need to be raised 14.98 cents to generate an equal amount of revenue as the proposed half-cent sales tax increase. The property tax rate increase would actually generate about $6.1 million in additional revenue, which is about $900,000 more than the $5.2 million Wilson County would receive in additional revenue from the proposed sales tax increase.

But Maynard said the additional money would be for good reason since any property tax money spent on construction of a new elementary or middle school in Wilson County Schools, Lebanon Special School District would get a proportionate amount of property tax money, which is currently 16 percent and fluctuates, depending on student enrollment.

“It all boils down to what the [Wilson County] Board of Education brings to me as its next project,” Maynard said. “If it’s an elementary or a middle school, we have to give Lebanon Special School District its proportionate share of the property taxes when we take out the bonds, whereas if it was funded through sales tax, we wouldn’t, because Lebanon Special School District would have already received its share.”

Maynard said the proposed jail expansion or a new high school, for example, would require a 12.78-cent property tax increase to equal the proposed half-cent sales tax increase.

Compared to surrounding counties, Wilson County’s $2.5189 property tax rate sits somewhere in the middle. It’s higher than DeKalb County at $1.8335, Smith County at $2.14, Sumner County at $2.50, and Williamson County at $2.15. It’s lower than Rutherford County at $2.68, Cannon County at $2.89, Trousdale County at $2.93, Robertson County at $3.0850 and Montgomery County at $3.07.

Last year, property taxes in Wilson County generated nearly $122 million or 46 percent of the county’s total revenue, sales tax generated nearly $23 million or 9 percent, the wheel tax generated nearly $2.7 million or 1 percent and the adequate facilities tax generated about $1.8 million or less than 1 percent.

Property tax increases are authorized by the Wilson County Commission.

A median-priced Wilson County home assessed at $275,600 generates total property tax revenues of $1,735.52. About $800 of that revenue is designated for educational operations. A median Wilson County household income of $60,774 generates local sales tax revenues of  $1,367.42. Nearly $700 of that revenue is designated for educational operations.

The total educational local tax dollars generated from the median property tax and median sales tax paid equals $1,484.47. The required local tax dollars to educate one child each year is $3,504. The remainder is funded by the state.

Of the $2.5189 total property tax, 0.8544 cents goes to the general fund, 0.1104 cents goes to public works for highways, 0.0455 cents goes to highway capital projects, $1.1622 goes to schools, 0.0535 cents goes to solid waste-sanitation and 0.2929 cents goes to general debt service.

Adequate facilities tax

One tax opponents to the sales tax say most appropriate to raise to fund future projects is the adequate facilities tax, also known as impact fees.

The adequate facilities tax is a one-time fee on newly built homes. It is currently $3,000 per home, which includes individual homes and individual condo or apartment units. In the past five years, along with the amount budgeted for the current fiscal year, the adequate facilities tax generated an average of nearly $5.1 million in revenue for the county on an average of 1,685 homes built each year.

The adequate facilities tax revenues are earmarked for two funds in the county’s budget, capital projects and debt services. The total amount received from the tax is divided about two-to-one for capital projects compared to debt services. The average for the past five years, along with the amount budgeted for the current fiscal year generated nearly $3.6 million for capital projects and nearly $1.7 million to pay debt. The annual amounts equate to about 2 percent of Wilson County’s combined revenues.

Wilson County, according U.S. Census Bureau estimates, increased by 22,449 residents – a 20-percent increase – in the last seven years. The U.S. Census Bureau also estimates Wilson County will add another 21,488 residents – a 16-percent increase – in the next six years. Its annual estimate for Wilson County is currently at 137,442. It estimates by 2023, the population will be at 157,930.

“This has put a strain on county infrastructure, in particular with regards to school buildings,” said Wilson County finance director Aaron Maynard. “We are now seeing a problem with the inmate population at our jail and will be in need of adding to that facility in the near future.”

If the Wilson County Commission were to increase the adequate facilities tax by $1,187, it would be able to raise about $2 million annually with no additional increases, but that would be enough to pay back the bonds, with interest, taken out for the new Green Hill High School in Mt. Juliet currently under construction and no other projects.

By comparison, the half-cent sales tax increase would generate $11 million with $5.2 million to Wilson County and $5.8 million to the city where the sale took place or the Lebanon Special School District. Property taxes would need to be raised 14.98 cents to generate an equal amount of revenue as the proposed half-cent sales tax increase.

But the option would mean most current residents would not see an increase of taxes. New residents would pay the tax, which essentially passes the financial burden to the new citizens.

Mt. Juliet Chamber of Commerce executive director Mark Hinesley offered what he described as a seldom-discussed scenario on the adequate facilities tax.

“To think that an adequate facilities tax only impacts new residents is simply not a true statement,” Hinesley said. “In general terms, suppose that a family with four children in our public school system finally has all four of them graduated and off to some points yonder. I believe the current cost of one child in our schools is between $7,500 and $8,000 per year per child. Clearly that is an impact on our system, but since they lived in that home prior to the current adequate facilities tax put in place, they have paid nothing extra to help offset the cost or impact over the years. Now, jump ahead a few years and those same parents who are now empty-nesters want to downsize from their four- or five-bedroom home into something smaller since the children are gone. If they go build a new home in which to retire, they are hit with the adequate facilities tax and have zero impact on the schools.

“However, the family who bought their four- or five-bedroom home to start raising their family pays nothing toward the true impact they make at a cost of let’s say more than $30,000 per year. We are taxing the wrong folks, as well as incentivizing the wrong folks. We are penalizing the wrong people. We want new homes with taxpayers and wage earners living there, and it’s an added plus if they are retirement age or at least have no children in school anymore

“I truly believe that what it really boils down to is it is a tax on people who do not yet live there or here and cannot vote. To say that only new residents are buying new homes is very misleading at best.”

But Maynard had a different take on the adequate facilities tax.

“Mr. Hinesley certainly has a compelling argument against an increase in adequate facilities tax,” Maynard said. “However, it is important to note that the market dictates the price of the home and not the actual cost incurred in building it, including any taxes paid. In 2008-2012, contractors were selling and even building a lot of houses with little profit margin, or even at a loss in some cases. Today, many people are bidding more than the asking price of the house. The contractors will profit to the extent that the market will bear regardless of the cost of construction.”

Wheel tax

The wheel tax is collected annually when residents register their vehicles. It is currently a $25 annual fee in Wilson County.

Wilson County has about 103,000 registered vehicles, which resulted in nearly $2.7 million in actual revenue last year. Last year, property taxes in Wilson County generated nearly $122 million or 46 percent of the county’s total revenue. By comparison, sales tax generated nearly $23 million or about 9 percent, the wheel tax generated nearly $2.7 million or about 1 percent and the adequate facilities tax generated about $5.1 million or about 2 percent.

By comparison to surrounding counties, Wilson County’s $25 wheel tax sits at the lowest compared to Smith County at $65, Sumner County at $51, Williamson County at $25.75, Rutherford County at $52.50, Cannon County at $50.25, Trousdale County at $40, Robertson County at $85.25 and Montgomery County at $30.50.

In summary

Whatever voters or the Wilson County Commission decide regarding taxes, its residents currently fare well when compared to other Tennessee counties.

SmartAsset, a New York-based financial technology company, recently ranked Wilson County as the second-best place in Tennessee to save money through a study of each county’s average household income, cost of living, purchasing power and taxes.

Wilson County’s median household income came in at $63,426, cost of living at $33,121, purchasing power at 1.91, estimated tax rate at 12.27 percent and best places to save index at 57.78.

Only Williamson County ranked higher, and Sumner, Rutherford, Fayette, Robertson, Tipton, Moore, Loudon and Montgomery counties rounded out the top 10.