Incentive payments driving county budget

Jun. 09, 2013 @ 09:02 AM

When you hear about the Rutherford County budget being flat, it can be somewhat misleading.

By in large, most of the county's departments will have their spending kept to the same levels as in 2012-13. However, one piece of the puzzle that can be overlooked is economic development incentives.

While incentives are not a problem because, theoretically it means the county is bringing in new business, they can cause some budgetary headaches because they can offset some of the new property taxes the county can rely on as additional revenue.

Such is the case for the recently approved 2013-14 county budget. The county is paying approximately $3 million in economic development incentives.

"Even though the incentives are indicative of new businesses, we have to pay those incentives and it keeps things pretty flat," Classen said. "The benefit will be when these new employees start spending money in the county ... that will impact the county's sales tax collections."

The issue will come more to light for the 2014-15 budget when those incentive payments will more than double.

"It comes down to whether our revenues will be in line to pay for those incentives," Classen said. "The incentives are great because we don't pay the incentives unless those companies pay their taxes.

"You have to hope that the jobs these companies bring in are such that it will eventually provide money for schools, the Sheriff's department and others."

Another slight change to the 2013-14 budget is an increase in county spending for Rutherford County Schools and Isothermal Community College.

Initial proposals were for an increase of almost $900,000 in the county's contribution to both entities. Commissioners agreed to fund one-third of the budget request increases ... with a provision.

"The initial (budget) amendment was for 50 percent of the increase they requested," Classen said. "They took that amendment and cut it from one-half of what they asked for and cut it to one-third.

"It was further amended that if sales taxes go up high enough to pay for the one-third and above, the amount above, half of that will go to raising the funding to the 50 percent."

What it means is that the county will fund the additional request by one-third and, if sales tax receipts are more than projected, half of the sales tax additions will go to bring the school funding additions to the 50 percent — which was the initial budget amendment proposal.

Somewhat confusing, but it made sense to commissioners.

"We felt good that the increased revenue could meet the one-third," said Commissioner Greg Lovelace. "It would have been a stretch to go to half. The bottom line is that if you look at both budget requests, there is really no fluff, It's not like they are trying to add a bunch of stuff.

"I think we had support for one-third among the commissioners. With the projections, we were more certain with funding one-third."

Even with economic development incentives and attempting to fund increases for schools, Classen and commissioners said they were pleased with the overall budget for the next fiscal year.

And with regards to incentives, Classen said there is no reason for the county to not continue in a competitive posture.

"My recommendation is that so long as the State makes incentives a part of the deal to bring businesses to the state, we will be right there fighting for those businesses," Classen said. "It's a game you have to play but we are going to play to win."