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Energy tax exemption could prove costly to Augusta

Thursday, Oct. 4, 2012 9:23 PM
Last updated Friday, Oct. 5, 2012 1:58 AM
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A new state sales tax exemption for energy used in manufacturing will cost Augusta $4 million over the next four years, according to a conservative estimate, and industry leaders are urging the city not to levy a replacement excise tax.

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Sue Parr, the president of the Augusta Metro Chamber of Commerce, speaks during the city budget work session about a costly new sales tax exemption.  JON-MICHAEL SULLIVAN/STAFF
Sue Parr, the president of the Augusta Metro Chamber of Commerce, speaks during the city budget work session about a costly new sales tax exemption.

House Bill 386, which created the exemption, also stands to do a number on the city’s tax digest, potentially triggering a tax rate adjustment, and will force an overhaul in the county tag office because ad valorem car taxes will not be levied on vehicles purchased after the law takes effect.

Approval of the energy sales tax exemption was pushed by chambers of commerce, including the Augusta Metro chamber, for “many, many years,” and all were delighted when the Legislature approved the exemption last spring, Augusta chamber President Sue Parr said during a city budget work session with the Augusta Commission on Thursday.

Though the bill gave cities and counties the option of replacing lost revenue with a new excise tax, a move urged by the Georgia Municipal Association, Parr urged the commission to “use extreme caution” with regard to the excise tax.

Nearly half of the city’s 25 largest property taxpayers are manufacturers, making the replacement excise tax unfairly “punitive” and potentially sending companies to counties that don’t have the tax, Parr contended.

Declining to levy the excise tax also would allow the city’s sales tax base “to grow organically” over the next few years, she said, adding that the commission could incorporate new taxes on Internet sales that went into effect last week.

Walter Sprouse, the executive director of the Development Authority of Richmond County, agreed that the excise tax was a bad idea. Sprouse said he hadn’t had a discussion with a prospect in 20 years that didn’t include potential incentives.

“How competitive do you want us to be?” he said.

“Augusta has been unusual in that we still have a strong manufacturing base,” Mayor Deke Copenhaver said, and the city continues to attract industry, such as Rockwood Pigment and an incoming Starbucks soluble products plant.

Also speaking against the excise tax was David Leach, the vice president of finance at DSM Chemicals, who said the company was happy the bill passed. DSM pays $3 million to $4 million in annual energy sales taxes, he said.

Jay Backus, the general manager at Resolute Forest Products, formerly Augusta Newsprint, said the plant, which employs 330, remains competitive despite the industry’s decline and idling of half the plant’s 62 machines over the past four years.

City Administrator Fred Russell said the lost revenue won’t be fun for a city that has been “managing fairly thinly” over the past few years. Russell, who calculated the $4 million impact as the exemption is phased in over four years, said he wasn’t quite ready to levy the excise tax, though. The decision would be made by a commission vote.

Commissioner Jerry Brigham called attention to another unexpected impact of House Bill 386. The exemption’s reduction on the local option portion of the tax digest might shift the burden to homeowners, who will see an increase unless the city lowers the tax rate.

The state continues to examine how the reduction is to be handled, Russell said, although Augusta will have to approve a budget before the Legislature convenes in January and potentially changes or refines application of the bill.

Tax Commissioner Steven Kendrick said House Bill 386 also affects annual ad valorem taxes on automobiles, which car owners pay when they renew their tags. On vehicles purchased after Jan. 1, the annual charge will be replaced with a one-time 6.5 percent sales tax paid on a vehicle’s fair market value, not its bill of sale, he said.

“That’s going to cause a lot of grief,” Kendrick said. The “state came here to tell us they don’t have a lot of answers.”

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OpenCurtain 10/05/12 - 07:37 am
Taxes, Taxes who will pay the Taxes

But how cutting the waste of tax revenues?

Over the years, we have allowed the development of too many different taxes in A/RC. Many of the new taxes were sold on the idea that someone else would be paying them for our benefit. (eg. Hotel Visitor Tax)

Instead of increasing and shifting tax burdens around, maybe it is time to reevaluate the original need, or consolidate a number of the expensive Special Purpose Focused Government Authorities and Departments that are little more than political nesting places or Money Pits.

A few that come to mind are the Augusta Downtown Development Authority, the Augusta Economic Development Authority, the Augusta Transit Authority and the Augusta Port Authority.

I am sure that I missed a number of more worthy money pits that would save $1 million dollars a year ....any suggestions?

F4therTime 10/05/12 - 08:27 am
Look out South Augustans..

These are all catch phrases for "you are about to pay even higher property taxes and see no benefit"...

resident 10/05/12 - 09:55 am

They do not mention that the advalorem on existing vehicles stays so that means the tax money still flows in just not like they want the forever tax but a one time tax...How about cutting wasteful spending...Driving gov vehicles home...not needed...All this ridiculous sign replacement going on...not needed the old ones (not very at that) were perfectly fine..changing fancy graphics saves nothing....lanscaping an overpass come is concrete and the dirt has to be trucked in along with sprinklers and water costs...simple but as you can see by example places money can be saved for sure....

Little Lamb
Little Lamb 10/05/12 - 11:28 am

It's sometimes hard to know what is in Jerry Brigham's mind by listening to his words. There are often some mis-fired synapses there. Still, Susan McCord tries hard. Here's what she reported:

Commissioner Jerry Brigham called attention to another unexpected impact of House Bill 386. The exemption’s reduction on the local option portion of the tax digest might shift the burden to homeowners, who will see an increase unless the city lowers the tax rate.

The exemption on the manufacturers is a sales tax exemption on their energy bills (electricity and natural gas — it's not clear whether it affects sales tax on gasoline and diesel). That means the city will be getting a tiny reduction in sales tax money returned by the state. That has absolutely nothing to do with the city's tax digest, which involves the property tax. Jerry Brigham is trying to mislead somebody here, and he has succeeded.

Augusta resident
Augusta resident 10/05/12 - 12:33 pm

They can just double how much we pay for trash collection and take us down to two times a month.

OpenCurtain 10/05/12 - 01:40 pm
Every Taxpayer understands it BUT

downtown. When times are hard we tighten our belts and we do without a few things. We all set our priorities and skimp on frivolous niceties.

A/RC needs to do more of the same and develop a list of key essential services that must be addressed and funded, then hold off voting on NEW costly projects like rerouting streets to Washington Rd, a $1.5m AC walkway for a parking garage, and other similar costly projects in the middle of a recession?

I am sure the Home Owning taxpayers would love to see some logical reductions and balances in the enormous tax $$$ digest that already being siphoned off for the latest, greatest and newest Augusta Revitalizing idea, that never seems to work as they planned or promised us.

BTW: 20 years with 5 year renewal reviews is more than enough for any business / Government partnership not 50 years as has been mentioned in the newspaper.

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