Prior to 2013, factories paid sales taxes on the energy they bought to manufacture their products, such as the paper, fertilizer, golf carts and ground beef made in Augusta.
No more, after Georgia House Bill 386 in 2012 exempted manufacturers statewide from paying the sales tax levy, 8 percent in Augusta-Richmond County, to be phased in over four years.
A year ago, Augusta Finance officials had a tough time ascertaining how much revenue they’d lose because the state Department of Revenue doesn’t disclose where the sales taxes are being paid.
Still, City Administrator Fred Russell suggested implementing a replacement excise tax, a move included in House Bill 386 to help local governments make up for the lost revenue.
But last year and again this year, the Metro Augusta Chamber of Commerce, Development Authority of Richmond County and area industries have lobbied vigorously against the city charging manufacturers any new taxes, even if old ones went away.
Comparing revenue from the education sales tax, which was not subject to the exemption, and SPLOST revenue, has allowed Assistant Finance Director Tim Schroer to estimate how much the city is losing from the exemption.
The estimate: About $1 million each year the exemption is phased in. In its second year, Schroer said the city is down approximately $2 million in revenue.
The funds lost aren’t just state sales taxes and local SPLOSTs. They include the city’s 1 percent Local Option Sales Tax, which is used to offset the property tax bills of every property owner, the “county sales tax credit” that appears on every tax bill, Schroer said.
The local excise tax on energy recommended by Russell this year – 2 percent, the maximum authorized by House Bill 386 – would generate $1.5 million toward the city’s general fund, which pays the salaries of sheriff’s deputies, tree trimmers and other service workers.
Raising the millage rate to replace the lost funds would mean about a .25-mill increase each year the exemption is phased in, for a total 1 mill increase in the fourth year, Schroer said.
Many of the companies are already among the city’s largest taxpayers. According to a Richmond County Tax Commissioner publication, International Paper, PCS Nitrogen, Augusta Newsprint, DSM Chemicals, NutraSweet, Procter & Gamble, E-Z Go, Tyco, Thermal Ceramics, Martin Marietta and Solvay Advance Polymers are among Augusta’s highest-billed taxpayers. International Paper is billed more than $1.6 million; the rest are charged $300,000 and up annually.
Those top taxpayers also employ more than 4,500 people from around the area, according to Development Authority data.
While American manufacturers as a whole are enjoying record profits, having streamlined during the downturn, Augusta needs to maintain an “edge” and not replace the lost local revenue, Augusta Commissioner Wayne Guilfoyle said.
“It’s opening doors where other counties are shutting doors,” Guillfoyle said.
Other counties, at least 50 of Georgia’s 159 have implemented the excise tax suggested by House Bill 386, according to a list compiled in May by Association County Commissioners Georgia. They include Columbia, which imposed a 2 percent levy in April, as well as Chatham, Dougherty and other mostly smaller, rural or suburban counties.
Barbara Cole, the controller at Resolute Forest Products, said electricity is the commodity company’s biggest cost, about 26 percent.
“Even with the reduction, the cost of our power is higher” than neighboring states, Cole said. “We respectfully request that the excise tax not be imposed.”
David Lee, the vice president of finance at DSM Chemicals North America, told commissioners his plant paid $1.5 million in property taxes and employs 600 people between its manufacturing and maintenance ventures.
“It’s a healthy chain,” Lee said. “At the same time, we operate on very, very thin margins. Even a small 2 percent increase has a significant impact,” including on the plant’s capacity to raise capital for expansion.
Augusta commissioners will revisit the excise tax proposal at a budget work session Tuesday where they will again attempt to plug an $8.5 million hole in next year’s budget.