The Sterlington Town Council signed off on an ordinance Tuesday levying a 2-percent sales tax on restaurants and convenience stores within the town’s corporate limits.
The restaurants and convenience stores would be subject to the new sales tax, which will go into effect Oct. 1, because they are located within the boundaries of a newly created economic development district.
Under state law, some governing entities can create special economic development districts to levy taxes on businesses. No election is required for voters to approve the tax because the tax applies only to businesses.
The Town Council previously killed the move to levy the two-percent sales tax amid opposition from local businesses. The town’s fiscal administrator, I.M. “Junior” Shelton Jr., revived the measure. Last year, the state appointed Shelton to handle all financial decisions in Sterlington instead of town officials after the town failed to make a debt service payment in late 2018. At that time, Sterlington had mounted some $20 million in bonded indebtedness with few revenues to pay any of it back.
“I don’t support any increase in taxes but I understand we’re obligated to pay bonds taken out by the previous administration,” said Town Council member Matt Talbert after the Town Council’s meeting Tuesday night. “We spent a year trying to pay those bonds in another way, but we couldn’t find anything.”
When a municipality is operated by a fiscal administrator, its mayor and Town Council have no authority to make financial decisions and serve solely as an advisory board. If the Town Council declines to sign off on a decision made by Shelton, the fiscal administrator has the authority to ask the district court to compel town officials to comply.
“We couldn’t afford to force the administrator take us to court and charge those legal fees to our citizens,” Talbert said.
According to Shelton, the 2-percent sales tax could generate about $200,000 a year.
“So if we can find $200,000 somewhere else, we can kill it?” said Town Council member Brian McCarthy, laughing.
Town Council member Zack Howse offered the motion to adopt the sales tax ordinance. McCarthy seconded the motion. The vote was unanimous.
“I’ve never supported an increase in tax but it’s something we have to do, or we have to fight it in court,” McCarthy said. “In the past, we went on good faith that we could find additional revenue but we couldn’t find it. Now we’re under fiscal administration, and we don’t have a leg to stand on.”
“It is my intention to kill it as soon as possible by finding other sources of revenues,” he added.
After the meeting, Howse listed a number of the Town Council’s attempts to find alternative sources of revenue. None of those efforts panned out, according to Howse.
“We tried to find a better solution, and there was none,” Howse said. “We racked up bills and now we have to pay them.”
Meanwhile, a recent report released by State Legislative Auditor Daryl Purpera’s office estimated Sterlington could lose anywhere from $34,000 to $111,000 in sales tax collections because of the COVID-19 crisis. Those projections were included in the Legislative Auditor’s “Effect of COVID-19 on Local Government Revenues” report released on May 7.
During the Town Council’s meeting, McCarthy asked Shelton whether he could provide any estimates of lost sales tax collections during the recent lockdown.
“I honestly don’t know how you would do that,” Shelton said. “There’s no valid way to figure that out.”
Purpera, the legislative auditor, is one of the three members of the state Fiscal Review Committee that appointed Shelton as fiscal administrator and monitors his progress on the job.