NASHVILLE — Saying Tennessee cities are "struggling financially," a West Tennessee lawmaker announced Tuesday he hopes to provide them help next year by pushing to "shift" a half-cent of state sales tax revenue — worth more than a half billion dollars — over to local governments.
Sen. Brian Kelsey, R-Germantown, announced the proposal during a public meeting earlier in the day with Shelby County legislators.
"Our cities are struggling financially," Kelsey said in a later statement. "The state has a surplus. The state should help our cities keep our property taxes low."
Kelsey's move comes as lawmakers eye last fiscal year's $900 million budget surplus with representatives and senators starting to offer how it ought to be used.
Some lawmakers are said to favor using some of the surplus for transportation as Gov. Bill Haslam prepares to come forward with a revenue-raising plan likely to include a gas tax to cut an estimated $6 billion project backlog.
Roads and other transportation projects rely on gas and diesel taxes paid by motorists that the state considers as user fees.
Kelsey, meanwhile, said he intends to introduce his bill providing a half-cent of the state's sales tax to locals as the new 110th General Assembly convenes in January.
He said his plan would be permanent and not just a one-year shift of $500 million. Kelsey also said county governments would receive their apportioned share of the additional sales tax funds, as well.
The Fiscal Year 2015-2016 surplus "means that the money could be put to use for cities with no new state taxes and no cuts to state services," Kelsey noted in his release. And that will help local property tax owners, as well, he added.
The city of Memphis could see more than $50 million, said Kelsey, who later noted he has already spoken to Haslam about his proposal and now hopes to enlist help from fellow lawmakers in the GOP-dominated General Assembly.
Haslam press secretary Jennifer Donnals said the governor "is working through the budget process and will, as he has done during his time in office, take a thoughtful and deliberate approach to the state's budget."
Chattanooga Mayor Andy Berke's office had no immediate comment on Kelsey's proposal.
Kelsey's move comes after lawmakers last spring dealt a major tax blow to city and county governments across the state by voting to phase out the state Hall income 6 percent tax on interest and investments over the next half dozen years.
The Hall tax is expected to generate an estimated $193 million annually for the state and another $102.7 million for local governments during the current Fiscal Year 2016-2017, according to the General Assembly's Fact Book, an annual publication issued by the Senate and House Finance Committees.
Local officials warned lawmakers last spring without success that cutting and ultimately eliminating the Hall tax, which an estimated 220,000 people pay, could result in tax increases for millions of residential, business and agricultural property owners as locals sought to make up the revenue.
Tennessee's sales tax levy is 7 percent. Local government option rates can go as high as an additional 2.75 percent.
According to the Fact Book, state sales taxes in the current fiscal year are expected to bring in $3.04 billion for Tennessee general government and another $4.76 billion for the state's portion of the jointly funded state/local Basic Education Program funding formula for K-12 schools.
Local governments are projected to see $366.4 million, according to the Fact Book.
Contact staff writer Andy Sher at email@example.com or 615-255-0550. Follow him on Twitter @AndySher1.
This story was updated Dec. 20 at 11:05 p.m.