In the aftermath of the Athens City Council’s decision last week to raise sales tax, Council President Jimmy Gill said — in hopes of defraying some heat — that the city wasn’t the only government body to tax its residents in order to pay for needs.
Gill said the Limestone County Commission added a 1 percent tax to the bills of Athens Utilities electric customers several years ago to pay for county needs.
And although residents, especially new ones, may see this as a fee, it is actually a tax.
In 2001, at the request of the Limestone County Commission, the local legislative delegation asked the state Legislature to enact a tax for Limestone County public buildings.
“At the time, the county was under a court order to build a new jail,” said Gary Scroggins, manager of Athens Utilities.
(The previous jail on Green Street in Athens was considered old, overcrowded and unsafe, and the county also wanted to build what is now the Clinton Street Courthouse Annex due to lack of space in the courthouse on Jefferson Street.)
The Legislature agreed with the local delegation and passed Act No. 2001-557, which gave the county two options to generate the money it needed for public buildings.
The first option allowed “the Limestone County Commission to levy additional sales or use taxes, or both, at the rate of 1 percent of gross proceeds of sales to finance the construction of public buildings in Limestone County.”
The second option allowed the commission “to levy additional gross receipts taxes within Limestone County at not more than 2 percent of the gross receipts for electricity or electric power to finance the construction of such public buildings.”
The commission chose the second option, the gross receipts tax. This required Athens Utilities to add 1 percent to the utility’s gross charges, costs, or billings to all consumers of electricity within the county, including those in the city of Athens. Once collected, the utility remitted the amount collected to the Limestone County Commission at least 30 days after collection.
The money collected from that tax, which is listed as “Limestone County fee” on your utility bill, is used to repay what was borrowed to build both the jail on Elm Street and the Clinton Street Courthouse Annex.
“It (the fee) was supposed to come off once the bond issue was paid,” Scroggins said. “I assume that was in 20 to 30 years.”
The initial term of repayment was from May 1, 2002, to Nov. 1, 2031, or about 30 years, said Limestone County Commission Administrator Pam Ball.
“In 2010, however, the county refinanced the
bond issue to obtain a lower interest rate,” Ball said. “By doing so, we reduced the
payment by six years.”
The debt is now scheduled to be fully repaid in November 2025, she said.
Initially, the 1 percent tax/fee was generating about $500,000 a year for the commission from gross electric sales, which at the time were about $50 million, Scroggins said. Today, gross sales are at about $95 million, he said, which means the tax is generating about $950,000 for the commission.
Last fiscal year, the county received $826,939 for the utility fee, Ball said.
“All of it was applied to the debt,” she said.
The utility fee was earmarked for the construction of the new jail and Clinton annex, and cannot be used for any other purpose.
The legislative act authorizing the 1 percent tax was specifically tied to the general obligation warrants (the municipal bonds), so the money could only be used for construction of the new jail and the Clinton Street Annex, Ball said.
Could the commission try to extend the debt or redirect some of the utility fee to pay for the jail expansion or some other project in the future?
No, the money cannot be spent at the discretion of the governing body unlike some of the money that will be generated by the city’s sales tax increase.
“The utility fee associated with the act cannot be amended,” Ball said. “The Legislature would have to pass a separate act to impose an additional fee for the jail expansion or any other public building construction in the same manner as 2001.”