The City Council will vote Tuesday on giving a quarter of online sales tax revenue to Decatur City Schools in fiscal 2021, but the transfer comes with the caveat that a portion of the funds must support child-related nonprofits.
Historically, the school system receives 1 cent, or 25%, of the city’s 4-cent sales tax from brick-and-mortar stores even though the City Council has never made that allocation binding. However, the city hasn't shared its online sales taxes with the school system since December 2018. The state collects an 8% online sales tax and allocates a portion to the general fund of Decatur and other cities.
City CFO John Andrzejewski said the city expects to get about $2 million in fiscal 2020 and again in fiscal 2021 from the online sales tax.
The council agreed in principle at last week’s work session on the fiscal 2021 budget to give the school system 25% of the online sales tax it receives from the state.
The council plans to hold another budget review session at 1 p.m. Tuesday in City Hall. It will hold an agenda review work session at 5:30 p.m., followed by its regular meeting 6.
The budget proposal would appropriate approximately $500,000 of online revenue to the school system. School officials have said they're OK with a split of the money that would provide about $177,000 to four nonprofits that usually get city appropriations and leave about $323,000 for the system for fiscal 2021, Council President Paige Bibbee said.
Decatur Youth Symphony would receive $15,000, the Morgan Child Advocacy Center $21,000, and Boys and Girls Clubs of North Alabama $100,000. Decatur Public Library would get $41,000 from the school system, reducing its city appropriation to $397,936.
During a review of Mayor Tab Bowling”s proposed fiscal 2021 budget last week, the City Council was looking for ways to reduce expenses with revenues expected to take a $3.9 million hit down to $65 million because of COVID-19.
The council began last week’s budget discussions with what Andrzejewski said was a projected $169,957 deficit. The council reduced many of the nonprofits by 5%, except a few related to economic development, health, safety and city services, to match the budget losses.
However, Councilman Chuck Ard wants to add $100,000 for the Decatur-Morgan County Entrepreneurial Center’s Best and Brightest Initiative, in addition to the $100,000 the E-Center already receives for economic development. This Best and Brightest Initiative offers to new college graduates up to $15,000 toward student loans if they live in Decatur for five years.
The additional appropriation left the budget deficit at $107,163, so Ard suggested the school system take the Best and Brightest money out of the school system’s share of the online sales tax.
But Andrzejewski said he met with DCS Chief Financial Officer Mandi Jones on Tuesday and she told him school officials are against giving any of their online tax revenues to an entity that doesn’t support children.
“We’re very open to supporting those nonprofits as long as it’s the ones that affect kids,” school board President Karen Duke said. “We understand the city’s (financial) situation so we’re OK with funding the other allocations from the online sales tax.”
Duke said she thinks Best and Brightest is a great program but the school system also needs the money. Jones recently presented a proposed 2021 budget for DCS that would require the board to dip into its reserves for $4.95 million to balance the budget.
“This is the first time since the state hit us with proration three straight years (in the mid-2000s) that we’ve had a deficit budget,” Duke said.
Andrzejewski said Wednesday he took the $100,000 meant for Best and Brightest out of the budget and made a few minor adjustments to turn the projected budget deficit into a $5,800 positive.
Ard said he still thinks the city should find $100,000 in the budget to support Best and Brightest even if means cuts elsewhere. E-Center Executive Director John Joseph began the initiative with private contributions and it recently received $125,000 from the state.
“I intend to go forward with the Best and Brightest and find a way to get the funds, but I don’t know if that will fly with the other council members,” Ard said.
Ard said the initiative has been very effective. He said it actually makes money because the new young professionals spend more in the city than they receive from the program.
But more importantly, Ard said, Best and Brightest is a tangible way to spur growth that’s been flat for two decades. So far, 88% of the 4-year-old initiative’s participants still live in the city.
Councilman Charles Kirby said he’s OK with the way the budget is now but he’s open to ideas.
“He (Ard) will have to figure out what else to cut if he wants that $100,000,” Kirby said. “I think it’s important we as a council come to a consensus on the budget.”
Andrzejewski said the city stopped sharing online sales tax revenue with the school system in December 2018 because online sales taxes do not fall under the city ordinance relating to tax distribution.