Johnson City leaders hesitant to pursue local option sales tax increase

David Floyd • Updated May 21, 2020 at 9:04 PM

Pointing to the hardships the public has experienced because of the novel coronavirus (COVID-19) outbreak, Johnson City officials expressed disinterest at this time in pursuing an increase in the city’s local option sales tax.

Vice Mayor Joe Wise said pursuing a tax increase at this time would be “tone deaf.”

“I think there is a case to be made for it,” he said during a budget meeting Thursday afternoon with members of the city school board and the City Commission. “I’m just not sure in the current environment that we’re setting ourselves up for at least a reasonable prospect of success.”

City Manager Pete Peterson said the state of Tennessee is forecasting a $1 billion shortfall that officials may need to cut out of the state budget next year. Whenever the state is grappling with a lack of revenue, Peterson said the source of those cuts comes into question.

“One of the topics that always comes up is could they, will they go statewide and capture the remaining portion of the local option sales tax that is available and claim it for use by the state and preclude the local governments from taking advantage or having the opportunity to use the remaining portion of that local option sales tax,” Peterson said.

Johnson City’s sales tax is currently 9.5%, which takes into account the 7% state sales tax and a 2.5% local option sales tax. The maximum allowable percentage is 9.75%, meaning there is a quarter of a percent available. The local option sales tax is capped at 2.75%.

Peterson noted it would be a good exercise for leaders to talk through all of the city’s potential revenue sources, and if the decision is made to pursue a local option sales tax increase, what that would entail.

Like other local governments in Tennessee, Johnson City is juggling a challenging budget this year spurred by an anticipated drop in revenues.

During the meeting Thursday, City Attorney Sunny Sandos walked officials through the relevant statutory requirements and outlined a hypothetical timeline for putting an increase on the ballot for a vote by the public.

The increase would require that the city approve a local ordinance, which would then be put on hold for 40 days. During that time the county can pass a resolution to match the capped amount. Because Johnson City’s limits stretch into three counties, that process would have to occur in all three counties.

School board member Michelle Treece was uninterested in pursuing a tax increase, noting that families are struggling.

“I find that it would be very difficult to ask people to pay more on taxes to recover from something that they’re already struggling (with),” Treece said. “I’d like to see if we could come up with a different way.”

At some point, Mayor Jenny Brock said the city needs to capture that remaining quarter cent for education and city services.

“I just don’t think this is the time to do that at all,” she said. “If we see seriousness coming out of the state that they’re going to try to get it, we may have to regroup and take a look at it again, but I’m like Michelle. I just don’t think this is the time we need to go after this quarter cent.”

City Commission

During their meeting Thursday evening, Johnson City commissioners approved on second reading the rezoning of a 42-acre property owned by Ballad Health from RTP (Research/Technology Park District) to B-4 (Planned Arterial Business District).

The property is at the intersection of Christian Church Road and Boones Station Road in Boones Creek. Peterson said the rezoning is staff-initiated and Ballad is in agreement with the change.

Hank Carr, senior vice president of Realty Trust Group and the representative for the property owner, said Ballad Health is investigating how to develop the property. He said the property is crucial to the traffic flow in the area.

“At this time there is no confirmed uses for the property,” Carr said. “We are merely investigating how to best develop and utilize the property over its future life.”

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