David Pennington, the mayor of Dalton, Ga., stands outside of the City Hall facility

DALTON, Ga. - Whitfield County voters told officials Tuesday they want to keep their money in their pockets, soundly defeating a 1 percent sales tax increase that would have gone into effect in January.

Voters also defeated a referendum allowing tax allocation districts that officials have said would help attract business to the area.

With 22 percent of registered voters casting ballots countywide, 60 percent voted against the sales tax increase. The proposed increase had divided voters and officials across the county, with groups forming for and against the issue.

Projects on the list to be funded by the tax included a performing arts center for Dalton, public safety equipment for Whitfield County and money to develop county parks.

Dalton leaders spoke out against the tax increase even though they put projects on the list.

Mayor David Pennington, who was re-elected to a second term Tuesday, told cheering supporters that having a lower sales tax would help bring business to the town.

"This is not a time to be raising taxes. We are putting money back into suffering taxpayers' pockets," he said.

But Whitfield County officials had pleaded for passage of the referendum, which would have brought in millions of dollars at a time when the county is struggling to pay its bills.

They expect to pass a budget for next year with a nearly $7 million deficit, and not having the sales tax increase only will exacerbate the shortfall, they said.

County Commission Chairman Mike Babb said Tuesday evening, "We will need to step back and re-evaluate our options.

"With the SPLOST being defeated, our only two options are to reduce services or increase property taxes," he said.

The tax allocation district referendum was defeated in all jurisdictions, including Dalton, Varnell, Tunnel Hill and Whitfield County.