August 21, 2013 10:20:00 AM
Carl Smith - [email protected]
A majority of Starkville aldermen Tuesday approved advertising a 2.78-mill tax hike, even though one alderman who previously supported the notice last week opposed the matter this week.
The board motion passed 4-3, with Ward 1 Alderman Ben Carver, Ward 6 Alderman Roy A. Perkins and Ward 7 Alderman Henry Vaughn casting "Nay" votes. Last week, Carver voted with the majority to proceed with the process to increase taxes.
Public hearings are required before the board can proceed with the tax increase. The city faces a mid-September deadline to set its budget.
If approved, Starkville's operational millage would be set at 22.78 mills.
Property taxes are calculated with mills. One mill is worth one-thousandth of a dollar. For example, if the millage rate is 20 mills, a property owner pays $20 for every $1,000 of assessed value on his or her property. The assessed value of a property is the appraised value multiplied by the assessment ratio (10% for residential properties). The owner of a property appraised for $100,000 in this example would owe $200 in taxes.
Municipalities, counties and school districts each establish their own millage rates to meet budgetary needs.
Starkville aldermen proposed the tax increase on Aug. 13 in order for the city to tend to increasing expenditures, including a long-overdue pay raise for its employees, departmental requests, outside contributions and its plan to construct a new City Hall and renovate Starkville Police Department's home.
While the tax rate remained relatively flat under the previous board -- former aldermen did approve a .45-mill increase in their last term -- expenses from this fiscal year are expected to increase into the next.
The board also heard a Perkins-commissioned report from Board Attorney Chris Latimer on the city's ability to back out of or defer payments associated with its City Hall public-private partnership. The agreement, which has a higher interest rate than general obligation bonds, does not specifically dedicate the city to a tax increase in order to make payments.
Latimer said the city is contractually bound by several covenants associated with its June 5, 2012 resolution starting the public-private partnership, and breaking those agreements would create serious bonding issues for Starkville in the future.
Perkins previously said upcoming City Hall payments are "choking the city's budget," and indicated last week he would vote to remove Starkville's financial requirements if law allowed him.
Reading from documents associated with the agreement, Latimer said Tuesday that "obligations to make payments ... and to perform and observe the arrangements shall be absolute and unconditional."
The city, documents state, "shall not discontinue any payments ... pursuant to the lease."
Failure of payment would place the city in default as outlined by the agreement, he said reading from associated documents.
"It is in my opinion that the documents provide the city no legal avenue to rescind the deal or revoke the deal," Latimer told the board.
The city is budgeting $370,000 for the project's debt service in the coming year, but the figure is expected to increase to about $538,000 per year. Since its implementation, officials said the 20-year lease-purchase agreement would be funded by monies free in Starkville's budget, soon-to-be retired debt and organic growth.
The municipal building fund is included in the city's capital projects line item, a $1.08 million budget which includes sidewalk accessibility projects ($132,000), street improvements ($350,000), storm drainage work ($100,000) and the Carver Drive ditch project ($53,000).
Ward 5 Alderman and Starkville Audit and Budget Committee Chairman Scott Maynard said money to fund the City Hall project were available in Starkville's budget, but the city pay raise plan itself would require a tax increase.
Carl Smith covers Starkville and Oktibbeha County for The Dispatch. Follow him on Twitter @StarkDispatch