The Sterlington Town Council this week proposed adding five years to the life of a sales tax that town officials originally promised would be a temporary burden on consumers.
During its regular meeting Tuesday, the Town Council introduced an ordinance that would extend the 10-year term of a two-percent sales tax, in Sterlington’s economic development district, to a 15-year term.
Sterlington created the economic development district, or EDD, last year. Under state law, an economic development district includes only businesses, not residents, allowing governing entities to create the districts and impose sales taxes or property taxes without an election.
Sterlington officials say extending the life of the sales tax was needed because the town cannot pay off $2 million in bonded indebtedness that comes due in April.
“We need to ensure we have adequate debt service coverage,” said Mayor Caesar Velasquez. “We don’t want to do this but we need it for our town’s finances.”
In 2018, the Town Council acted under former Mayor Vern Breland to incur the $2-million debt with a three-year term. In light of Sterlington’s fiscal woes, the town has made interest payments but little to no payments on the principal, according to Monroe attorney Wes Shafto, who serves as the town’s legal counsel on bond matters.
“The bonds were originally secured with sports complex revenues, but those weren’t enough,” said Shafto, with the Monroe law firm Boles & Shafto.
Cross Keys Bank agreed to refinance the $2-million bonded indebtedness if the debt was secured with revenues from the two-percent sales tax instead of revenues from the Sterlington Sports Complex, according to Shafto.
The term of the debt would be extended to match the proposed 15-year term of the two-percent sales tax.
The Town Council is expected to take a final vote on the matter at its next meeting.
When the Town Council first approved the economic development district’s two-percent sales tax, council members assured their constituents the tax was a temporary salve meant to stabilize Sterlington’s weak finances.
Under Breland’s tenure as mayor, Sterlington accumulated some $20 million in debt with few sources of new revenues in addition to other questionable financial activities.
Breland now faces criminal charges stemming from his time as mayor.
On Tuesday, Shafto told the Town Council they could pay off the $2 million in bonded indebtedness with revenues from the two-percent sales tax sooner than the proposed 15-year term, if they wanted.
“In order to make this financing happen, we have to extend the tax to match the term of these bonds,” Shafto said. “This is a good thing. This is consistent with the town restructuring its finances.”
Town Council member Zack Howse said, “If we pay it off in eight, we can drop the-”
“We can kill the EDD,” Town Council member Brian McCarthy interjected.
Town Council member Ron Hill offered the motion to extend the life of the sales tax. Town Council member Matt Talbert seconded the motion. The vote was unanimous.
“As soon as we can get rid of it, we will,” Velasquez told The Ouachita Citizen after the meeting.