Hoover council eyes sales, rental, lodging tax increases

The Hoover City Council has come up with a counter-proposal to the sales and lodging tax increases proposed by Mayor Frank Brocato in early June.

Brocato on June 4 proposed raising the city’s share of lodging taxes from 3 percent to 6 percent and raising sales and use taxes from 3 percent to 4 percent.

On June 18, Council President Gene Smith substituted different ordinances that would keep the proposed lodging tax increase intact but cut the sales and use tax increase in half.

The council’s new proposal would raise the city’s portion of sales and use taxes to 3.5 percent instead of 4 percent and put the overall sales tax rate in Hoover at 8.5 percent in Shelby County and 9.5 percent in Jefferson County.

Smith also introduced an ordinance that would boost the city’s real estate rental or lease taxes from 1 percent to 2 percent, which was not part of the mayor’s tax proposal. This would impact anyone paying rent on an apartment or house in Hoover.

The mayor’s proposal was estimated to raise an additional $22 million in taxes every year for the city, including $20 million more in sales taxes and $2 million more in lodging taxes.

The council’s new proposal would raise an estimated $10 million more in sales taxes, $2 million more in lodging taxes and about $1 million more in real estate rental or lease taxes, for a total of $13 million in additional revenue for the city.

Melinda Lopez, the city’s chief financial officer, said the city needs an average of $11 million more each of the next five years to prevent projected budget deficits and provide enough money for basic capital projects that help maintain what the city already has.

New proposed ventures

The mayor’s proposal included funding for:

► $4 million a year for Hoover schools

► $22 million to cover the city’s match needed to obtain $110 million in federal money to build a new interchange near South Shades Crest Road along Interstate 459 and improve the exit at John Hawkins Parkway.

► $22.3 million for a new fine and performing arts center (plus $1 million a year to cover operating costs)

► $20 million to provide land, building site preparation, utilities, construction and traffic improvements for a $300 million project that will bring more than 1,000 jobs to Hoover. (Sources have told the Hoover Sun this is the relocation of the Medical West hospital from Bessemer.)

► $1.7 million to build a Hoover Public Library branch in eastern Hoover (plus $700,000 a year for operating costs)

► $500,000 per year to develop bicycle and pedestrian paths

► $450,000 per year to provide a tourism and cultural program to secure the future of Aldridge Gardens and assist with attracting major events to Hoover

The mayor said in early June that he realized the extra 1 percent in sales tax revenue wouldn’t allow city officials to “go crazy on a spending spree.” The projects he proposed are projects that residents have repeatedly said in town hall meetings and surveys that they want their city government to do, he said.

“This city’s been built to a level of excellence over 50 years by listening to our citizens and meeting their needs and their expectations,” Brocato said. “We can’t continue to have a great city unless we are willing to pay for the great things we have and the great things we aspire to have.”

Other cities such as Mountain Brook, Homewood and Vestavia Hills didn’t hesitate to invest in themselves, Brocato said.

“Nobody moved to Hoover to be average or to see us fall behind,” he said. “We’ve got a wonderful city. We need to continue to build on our past. Gentlemen, we are truly at a crossroads, and it’s time to decide our future.”

Penny tax too much

Smith said he, Councilman Curt Posey and Councilman Casey Middlebrooks met with the mayor and City Administrator Allan Rice on June 14 and told them they didn’t think the penny sales tax increase was going to survive a vote of the council. Posey initiated the counter-proposal, he said.

Basically, council members believe the mayor’s proposal would take care of the city’s needs, plus create a large sum of money that could be spent on whatever, Smith said.

“We’re asking the council to vote on what the city needs and only what the city needs,” he said.

While the mayor had a lot of great ideas of how to spend the money that would have been generated by his proposal, the bill for many of those projects would not come due until after the next election, he said. Smith said he didn’t feel it was appropriate for the current council to provide the next council with unfunded mandates.

The extra money that the mayor’s proposal would have generated is money that should stay in the pockets of residents and others who choose to shop in Hoover, Smith said.

Councilman Curt Posey said he was glad to see the mayor incorporate the feedback from the Future Hoover town hall meetings into his financial presentation. It helps paint a picture for what Hoover can look like in the future, he said.

He grew up in Hoover in the 1980s when the city was exploding with growth and the construction of the Riverchase Galleria, he said. “I think that a lot of people who have moved back here who are my age are looking to recapture some of that magic,” Posey said.

People want to take Hoover to the next level, he said.

‘Appetite of the people’

However, Posey said he felt like the city had $11 million in annual needs, but the mayor was asking for $22 million per year in revenue. He doesn’t feel right asking people to pay twice as much as the city needs, he said.

If at some point in the future city officials decide to pursue some of the other projects the mayor mentioned, then perhaps the city can borrow money for those projects, Posey said.

“But at this point in time, the appetite of the people is ‘I’m willing to lend a hand to fill a hole, but I don’t want to give you extra to do projects that may or may not be the public will right now,’” he said.

Some of the other projects, such as a fine arts facility, also may could be done through a partnership with private contributions, Posey said.

Middlebrooks said the mayor’s original proposal was ambitious in his desire to increase city services and the standard of living in Hoover, diversify the city’s economic base and provide more support for schools, and he commended him for that.

But the counter-proposal is a good compromise and workable solution for the city’s needs, he said.

“I think the amended proposal allows us to continue our standard of living, continue adding to the city somewhat,” Middlebrooks said. It doesn’t give any more money to the schools like the original proposal, but I am fully supportive of Hoover City Schools going after the lid bill and further funding our schools through the use of the property tax, which is a more stable revenue source.”

Property tax increase?

Brocato has said he would be willing to work with the school system to ask the Legislature to let Hoover go above the statewide cap of 75 mills of property taxes, if and when the school board thinks it needs to do so. Hoover residents currently pay 72.6 mills of property taxes. The school board and City Council would need to ask the Legislature to approve a public vote on the matter across Jefferson and Shelby counties.

Smith called a special City Council meeting to consider the tax increases July 10. Originally, the tax increases were slated for a vote July 2, but Smith noted that is the week of the Fourth of July holiday and many people may be out of town. He wants to make sure people have an opportunity to share their thoughts at the council meeting when the vote takes place, as well as during the council’s July 2 meeting, he said.

There’s no guarantee that the tax increases in the counter-proposal will pass, but he is in favor of them and expects a 4-3 or 5-2 vote to approve them, he said.

Brocato said his push for additional revenue is a work in progress. He thinks the mood of the council is to address the most immediate needs right now, and he hopes city leaders will continue to work to address other needs in a timely manner, he said.

There are still a lot of conversations taking place about how to address the school system’s needs and a lot of different opinions on the best way to do that, he said.

The counter-proposal up for a vote July 10 will help address the most immediate needs and help city officials as they prepare a budget for fiscal 2019, he said.