Local officials dispute state's assessment of how taxes are used here

Mar. 16, 2013 @ 09:46 PM
Officials from the Sevier County School System and county government dispute claims by a state education spokeswoman regarding how local tax money is distributed.

Kelli Gauthier, a representative of the Tennessee Department of Education, claims Sevier County government has hurt its own school system by directing the majority of local sales tax revenue toward special tourism zones instead of the schools.

Gauthier was responding to questions about state-mandated technology required in all school districts in 2014 for new assessment testing. The state will grant school districts money for the technology, but local school and county officials believe their school system is not getting a fair share. The district is slated to receive $373,893, but school officials estimate the total cost to be around $3.6 million.

Gauthier said most of the revenue the county generates in sales tax "goes into paying off the bonds of that (tourism) industry, whereas in most counties, about half of the sales tax revenue goes to the schools. Because their fiscal capacity is larger, that decreases their state share of money, which should be made up by sales tax as it is in most districts, but in this case it's not.”

Sevier County Mayor Larry Waters said Gauthier's claims about where the county's sales tax revenue goes and how much the school system receives are inaccurate. He said half of the county's sales tax revenue does indeed go to the school system, by state law. Waters also said the County Commission never voted to direct money away from schools and into a Tourism Development Zone (TDZ).

He said Gauthier is referring to legislation allowing Pigeon Forge to set up a TDZ and Sevierville to create a Central Business Improvement District (CBID). Sales tax revenue generated from new businesses in those cities’ special districts goes back into the cost for infrastructure improvements, not the school system.

“That's what she's referring to, but the county and school system has nothing to do with that,” Waters said. “Those were the cities’ decisions. It wasn't voted on by citizens or the county.”

Karen King, Sevier schools director of finance, said TDZs are common in cities. Memphis, Nashville, Knoxville and Chattanooga all have them, King said, but they usually are created for one project. Pigeon Forge's TDZ geographically encompasses almost all of the city, and Sevierville’s CBID is also expansive, stretching north from downtown along Winfield Dunn Parkway into Kodak.

Because these tourism zones are so large, more sales tax revenue is needed to defray the expanding infrastructure costs, but the state doesn't take that into account when distributing funds.

“When you look at sales tax solely as if the 90,000 people who live here are the only cost, that is totally incorrect,” King said. “There is a service burden that goes along with tourism that other counties do not have. Upkeep of our county is influenced by the fact that we have 125,000 non-resident residents every night.”

The millions of annual tourists generate much of the sales tax revenue in the county, which makes the district's fiscal capacity seem much larger than it really is, King said.

Although Gauthier was incorrect about which entities sent their tax revenues away from schools, some might argue a disproportionate amount of money is going into tourism rather than schools because of the cities’ large tourism zones.

According to King, last year $1.4 million in sales tax revenue from the CBID and TDZ went back into those zones instead of benefiting the school system.

King said the school system does not blame the two cities for what they do.

“No one faults the cities for pursing the legislation to create the CBID and TDZ,” King said. “An oversight in the legislative process caused the local impact on Sevier County Schools to be overlooked. The school system is caught in a perfect drain on funding from both sides.”

Gauthier also said that if the school system doesn't have the technology in place for the assessment test by 2014, it could use the paper-and-pencil option of the test.

King said school officials were not aware of a paper-and-pencil option, adding the school system still intends to work toward getting the requisite technology: approximately 50 computer labs across 27 schools.

“The problem with that (paper and pencil) comment is, why would Sevier County not want to be like the rest of the state?” King said. “Why would our children not want to be able to have the same advantages of technology that other children would? We will work toward getting our children the technology. That's not something we're going to stop.”