published Sunday, November 13th, 2011

Whitfield County divided on impact of tax increase defeat

DALTON, Ga. -- After the sound defeat of a sales tax increase last week, Whitfield County will be the only one of Georgia's 159 counties to have a 5 percent sales tax on Jan. 1.

Those who opposed the increase, including re-elected Dalton Mayor David Pennington and his City Council members, say the lower tax will put money back into taxpayers' pockets and spur economic growth by bringing in customers from Tennessee and surrounding counties to shop.

People who supported the tax increase say no one looks at a 1- or 2-cent difference in sales tax when they decide where to shop. They say the defeat of the tax only means a loss of about $17 million year in government coffers that could have been used for capital projects such as debt service, park improvements, equipment purchases and road construction.

The vote divided citizens. Two groups -- one pro and one anti -- handed out fliers and ran newspaper ads in the weeks leading up to the election.

With 60 percent of voters giving the sales tax a thumbs down, the defeat is believed to be one of the widest such margins in state history, officials say. Out of the county's 23 precincts, not a single one approved the referendum, with the widest margins against it in unincorporated precincts.

In the days after the election, talk in coffee shops and at meetings centered on the repercussions from the vote.

"I know some people are really hurting in this economy and I feel for them, but I think it was more an ideological position than an economic strategy," said Dustin Coker, who organized a group to support passage of the referendum. "We felt like there were items the county needed and other quality-of-life projects that would have made this a better place to live."

On the other side of the table is Jan Pourquoi, a Dalton business owner.

"We need a new culture of spending; the money we have here is not properly spent," Pourquoi said. "Why do county workers think they deserve a raise? Why should we keep people who aren't productive? There are people out there who lost their jobs, who have had pay cuts. Why should they be asked to pay for this poor management?"

All counties in Georgia have a 4 percent sales tax -- except on groceries -- that goes to state coffers. Counties then have an option to add various local taxes, including a local option sales tax, a special purpose local option sales tax or an educational local option sales tax, with the last two passed by voter referendum.

A handful of Georgia counties have a 6 percent sales tax while all other counties, including all the Northwest Georgia counties surrounding Whitfield, have a 7 percent sales tax.

Whitfield County's previous 1 percent special purpose local option tax ended in December 2010, while the 1 percent schools tax will end next month. The two school systems -- Dalton City and Whitfield County -- agreed not to ask for a new tax this year to make it more likely that the county tax would pass, but it still was defeated.

In many counties, the sales tax referendums have become somewhat routine and are placed on the ballot almost every time they expire. Education sales taxes in particular usually pass by a wide margin.

In Whitfield County, where about 15 to 20 percent of the sales tax is collected from people traveling on Interstate 75 or coming into Whitfield from surrounding counties, the sales tax is an especially attractive way to bring in money.

Budget Shortfall

For Whitfield, which already is looking at passing a 2012 budget with a $7 million deficit, the loss of potential sales-tax funds is a severe blow. The county has the second-lowest property tax in the state and one of the largest homestead exemptions.

Now with the lowest sales tax looming, money is tight. County Commission Chairman Mike Babb said he and his fellow commissioners will try to make the best decisions they can in dealing with the shortfall.

"We are trying not to do anything as an emotional response to the defeat," Babb said. "Everything is being looked at."

Some projects on the sales tax increase list will be put on hold, officials said, but the county will need to dip into its general funds to cover some of the essential projects.

County officials have said they almost certainly will need to raise property taxes next year.

In an email sent to all county employees before the election, Human Resources Director Jackie Carlo warned that Whitfield may lay off employees or require more than the four already-planned furlough days for next year if the sales tax increase didn't pass. Babb seconded that position.

With 65 percent of the county's $43 million budget going to employee salaries and benefits, those cuts must be looked at, he said.

Despite criticism from Pennington and citizens such as Pourquoi, county officials cite numbers showing Whitfield already spends less on services than other counties of comparable size and population.

"Apparently running a county for a long time at the bottom end of what counties cost to run means nothing," Babb said. "Citizens like to hear the term 'cutting.' But the voters have spoken, and we'll do what we need to do."

Retail Bonanza?

Opponents of the sales tax increase seized on the bad economy as one reason to vote against the tax increase, but Pennington said he believes the lower taxes will be an economic boom for the county.

Using the slogan "nickel sales tax," Pennington campaigned against the referendum, saying the difference in tax dollars will bring both retailers and customers to the area.

Others are not so sure. Greater Dalton Chamber of Commerce President Brian Anderson said there is no strong evidence that sales tax differences, especially only a few cents, make shoppers change their habits.

Coker agreed.

"I don't buy the argument that a lower sales tax will encourage people to spend a lot or that it is an economic advantage," he said. "People will spend gas money to drive to Chattanooga just to shop at places where they want to shop."

A spokesman for Target, one of the "big box" stores Dalton has tried to attract the area, declined comment on whether sales tax influences Target's decisions on where to open new stores.

The day after the election, Elyse Cochran, who heads the Joint Development Authority in Whitfield County, warned elected officials and citizens on a charter commission studying whether Dalton and Whitfield should merge government services that low taxes are not always the key to economic development.

"Businesses look at taxes, yes, but they are not going to come just because property taxes are rock bottom," Cochran said. "The perception is you get what you pay for."

about Mariann Martin...

Mariann Martin covers healthcare in Chattanooga and the surrounding region. She joined the Times Free Press in February 2011, after covering crime and courts for the Jackson (Tenn.) Sun for two years. Mariann was born in Indiana, but grew up in Pennsylvania, Tennessee and Belize. She graduated from Union University in 2005 with degrees in English and history and has master’s degrees in international relations and history from the University of Toronto. While attending Union, ...

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