Local Sales Tax for the Schools?

If you remember our friends in the financially-strapped and taken-over-by-the-state Greenland School District in Arkansas, the local city council is proposing a sales tax increase designated for the district only.

A member of the city council is the former president of the final voter elected school board and believes that "If we pass the sales tax, most of the money will be paid by people passing through town..."

That only works if you have a strong commercial base already existing in the town.

"If the school can't stand on its own, we go to Fayetteville and taxes go up forever," Groom said. "The 2 percent tax will last for only two years."

The bottom line, according to Groom: "Even if you don't care one iota about the school, you're better off passing a sales tax for two years and letting people from out of town pay for it."

It's an interesting crossroad. Is it legal in Pennsylvania? I doubt it. Is it worth a try? I doubt that too.

What I do know is that we better start throwing ideas out on the table pretty soon.

Greenland Aldermen Consider Sales Tax To Help Schools
Legislature Changed Law In 1993 To Allow Funding Method
Friday, November 28, 2008 7:50 PM CST in News

A tactic to boost school income using sales taxes that failed 17 years ago in Fayetteville may work in Greenland.

Bill Groom, a member of the Greenland City Council, proposed letting Greenland residents vote on extending a 1 percent sales tax to benefit the financially strapped school district.

Groom, the former president of the Greenland School Board before the State Department of Education dissolved the school board and took over the district, says a sales tax to finance sewer improvements will end next year.

Greenland voters could extend the tax and divert a portion of the money toward bringing school finances back into the black, Groom said.

"Bald Knob has done it," Groom said. "I've talked to them and they've been real helpful. They've sent us a sample ballot and we've talked to a tax attorney in Little Rock, recommended by our City Attorney Danny Wright, about the legal wording."

Bald Knob dedicated 95 percent of its sales tax to the school and 5 percent to the city, Groom said. Bald Knob residents approved the measure last year. It has not been constitutionally challenged.

The Fayetteville School District attempted a similar tactic in 1991, but Springdale attorney John Lisle sued the district.

Back then, Lisle said, the move was judged to be illegal.

"At that time, no sales tax law existed allowing you to use a sales tax for schools," Lisle said. "That made the Fayetteville tax unconstitutional."

Lisle said he'd just moved to Northwest Arkansas from Little Rock and his father had voted for the Fayetteville tax. That alerted Lisle to the problem.

"It took close to four years to get it all done including the appeals," Lisle said. "They'd estimated the tax would raise $130 million. We won. They lost. This is the first I've heard of it since."

However, the state Legislature intervened in 1993, passing a law that makes it legal for cities to share sales taxes with schools.

In part, the law stipulates that a school district does not have the authority to impose a sales tax itself. However, a city or county may designate on the ballot that a portion of a sales tax will be dedicated to a school district.

In that scenario, only voters inside Greenland would vote on the tax. The Greenland school district extends from Prairie Grove on the west to Elkins on the east and from Fayetteville to the north and past Winslow to the south.

Voters outside the Greenland would pay the tax only when purchasing items or services from businesses in Greenland.

Groom said, from his point of view as an alderman, the tax is justified -- even though the city would have to pay $3,500 for a special election.

"We have a 2 percent sales tax with 1 percent dedicated to sewer improvements," Groom said. "The sewer tax is about to end. The sewer allowed us to get the businesses along Interstate 540, which is most of the sales tax coming into the city. Without the 1 percent sales tax, those businesses couldn't have been established."

The school tax would last for two years, bringing in about $100,000 per year, Groom said.

"If we pass the sales tax, most of the money will be paid by people passing through town," Groom said. "There's not a lot of money that Greenland people spend themselves in Greenland. So, we're looking at an outside stream of money versus 8, 9 or 10 mills more than we're paying now if we're annexed into the Fayetteville school district. That would have a great effect on people's budgets."

Groom said he feels Greenland schools are at a crossroad.

"If the school can't stand on its own, we go to Fayetteville and taxes go up forever," Groom said. "The 2 percent tax will last for only two years."

The bottom line, according to Groom: "Even if you don't care one iota about the school, you're better off passing a sales tax for two years and letting people from out of town pay for it."