Warren County voters will soon decide the fate of the wheel tax. Look deep before you leap, says County Executive John Pelham.
“I’m for the wheel tax,” Pelham said. “I’ve made no bones about that. I ran on that, my support of the wheel tax, in the last election. Early voting begins Feb. 15. I hope everyone will go out and show their support for the wheel tax.”
Pelham says he would like voters to know three things before they head to the polls: 1) how we got here, 2) where we are now, and 3) what’s about to happen.
• How we got here – The $30 wheel tax, which currently generates around $1 million annually, was enacted in 1991 by county commissioners and was tied to the bonds to finance the building of two schools — Warren County High School and Hickory Creek Elementary. All debt on those schools will be paid this June.
Exactly 100 percent of the wheel tax generated in the last 20 years went to pay for the building of those two schools. Pelham says he has been questioned about that.
“Every penny of the wheel tax went to retire that debt,” he said. “Plus some additional money. The wheel tax didn’t fully service that debt. Along with that, the county had to add additional revenue, but every penny of the wheel tax went toward that debt.”
• Where we are now — County commissioners decided in August 2011 to allow residents to decide if the wheel tax will continue past the original expiration date of June 2012.
“I think individuals have made comments to our commissioners that in 1991 they didn’t have a say on the wheel tax,” said Pelham. “I believe a majority of our commissioners support the wheel tax, but they wanted to allow their constituents to have a say this time around.”
A resolution was passed stating if voters accept a $30 wheel tax it will be exclusively for the building of two schools — Dibrell School and Morrison School.
“Once again, it will be exclusively for school debt,” said Pelham. “Nothing else.”
Debt for Dibrell Elementary is $6 million, with Morrison Elementary debt at $9.3 million. Prior to those projects, county commissioners borrowed approximately $6.5 million to build Centertown School. The last of the debt will be paid in approximately 20 years.
“As of June, when the wheel tax is set to expire, the county will have approximately $18 million in school debt on three schools,” said Pelham. “That’s not including interest. The money has been borrowed and the debt must be paid, even if we lose the wheel tax.”
School debt for buildings is the obligation of the county and not the school system, and it is not included in the state’s maintenance of effort law. Pelham says this is one of the most important points he wants people to understand before they vote.
“The county has a responsibility to provide the school buildings for education,” Pelham said. “That’s over and above maintenance of effort for the school’s budget. We have to, by law, provide school buildings for education. Debt on those buildings, including interest, is the responsibility of the county.”
• What’s about to happen — Voters must decide to continue the wheel tax or allow it to expire.
Pelham says he doesn’t want to think about the ramifications of losing the wheel tax.
“I don’t want to think about losing it,” he said. “However, voters need to understand the $18 million in debt will remain regardless of what happens with the wheel tax. It has to be paid by the county.”
While county commissioners would ultimately be left to decide what to do if the current wheel tax expires and voters decide to not allow another one, Pelham says he can only think of two options, replace it or adjust the budget.
Replacement would be through property taxes. With 1 cent in property taxes generating $60,000, a 17-cent tax increase would be necessary to generate approximately $1 million.
Some supporters of the wheel tax use a comparison between the low number of people who own property and the large number who own a vehicle to encourage the wheel tax as the fairest way to tax.
“I feel that is accurate, but I can’t confirm it,” Pelham said of the assertion. “I do have the number of registered vehicles and population. Most everyone owns a vehicle. The numbers weigh that out.”
As of the 2010 census, there were approximately 39,000 residents in Warren County and by county records, there were 36,526 registered vehicles in 2010.
“Wheel tax spreads the burden and everybody helps to support our children’s education in regard to this debt,” said Pelham. “That’s why I support the wheel tax. I feel it is the fairest way to go.”
If the wheel tax is lost and a property tax increase is necessary, it will be the first one in almost a decade.
“We are in our ninth budget year without a tax increase,” said Pelham. “That’s a compliment to our county commission. They try to keep property taxes low. At the same time, they pass progressive budgets that support education and all the other causes in the county as well.”
Adjusting to the loss could mean dipping into the county’s debt service reserves. Pelham says doing that will cost the county money in the long run.
“What people need to understand about debt service is that we are required by law to keep a certain percentage,” said Pelham. “It’s not as large as we have in place. However, by having a higher amount of debt service reserves it allows us to be rated higher.”
A higher rate translates into lower interest rates when the county borrows money for projects such as a new school, jail, etc. If the fund balance in the county’s reserves is reduced, the county’s rate will drop and interest rates will increase.
The correlation between wheel tax and new schools is complicated and important, says Pelham.
“I would be more than willing to speak on this, if someone would like me to attend their civic or group meeting,” he said. “I know this is short notice, but this is a terribly, terribly important issue in the county. We need to keep this wheel tax in place.”
Early voting starts Feb. 15. For more information, call 473-2505.