Birmingham Economic and Community Revitalization Ordinance

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The Birmingham Economic and Community Revitalization Ordinance is an ordinance proposed by Birmingham mayor Larry Langford shortly after he took office. The measure doubled business license fees and imposed an additional 1% sales tax in order to generate $72 million in annual revenues which will fund a $500 million bond issue for numerous capital initiatives. It was passed by the Birmingham City Council on December 4, 2007 with the revenue hikes taking effect on January 1, 2008.

The 1% sales tax was scheduled to expire at the end of 2018. On April 10 of that year the Birmingham City Council voted 4-1 to make it permanent. At the time it was credited with providing $32 million in annual revenues for the city's general fund. Councilor's Valerie Abbott and Hunter Williams felt that it would be too damaging to the city's budget to remove the revenues. Councilor Lashunda Scales, the lone vote against the measure, argued that the tax was no longer being used for its original purpose.

Background

Langford's campaign motto was Let's Do Something! and, soon after the results of his outright election were certified, he began discussing specific new programs. Among the projects he campaigned on were construction of a domed stadium, improved mass transit, cleaning up neighborhoods, reducing crime, and improving Birmingham City Schools. When asked how he would pay for such a full slate of programs, he responded that "nothing is free." He promised to have a proposal for financing the domed stadium and transit improvements within 30 days of taking office.

Summary

A summary of the proposal was given to the Council on November 15, 2007. It consisted of a 1-page description accompanied by a Birmingham News column by Eddie Lard, a Time magazine article about the "One Laptop Per Child" program, and a breakdown of municipal sales tax collections in Jefferson County. The proposal was distributed to the Council members in sealed envelopes stamped "Personal and Confidential. Not for Distributions. Only Mayor May Comment on Contents." Langford requested that the Councilors return their individual comments to him before he made the proposal public on Monday November 19.

The basics of the proposal were quickly leaked to the Birmingham News, prompting an angry outburst from Langford over the weekend. The News made a formal request for copies of all documents, citing Alabama's "Sunshine Laws". Council president Carole Smitherman sought the opinion of the Council's legal advisor, J. Richmond Pearson, before responding. His opinion was that the proposal was, in fact, a public record. A copy was then provided to the News and published on al.com.

Langford requested a formal vote on the proposal on November 27, but most members of the council said that such a major ordinance would need much more detail and more public input before it could be adopted.

Proposal

Langford's proposed ordinance was distributed in the form of a one-page summary, which began with Langford's familiar motto, "Birmingham voters know if you always do what you've always done, you'll always get what you've always gotten."

Business license fees

The first revenue proposal is a 100% increase in business license fees, which he estimated would generate $36 million in revenue. It was later determined that insurance companies were exempt from local license hikes by state law, leaving approximately $27 million in new revenues $19 million would finance a $500 million bond issue to finance construction of a "Dome Stadium". The $9 million left over would be used for transit improvements. If additional revenues can be found to bring the transit funding to $17 million, matching federal grants could bring the total up to $25 million in recurring funding.

The estimated economic impact of transit improvements given by the Mayor is $42.5 million per year. The stadium would be expected to provide a $1.25 billion economic impact over the life of the project. The total economic impact (over 20 years) was estimated at $2.06 billion for the $36 million investment.

Sales tax increase

The second revenue proposal is a 1% increase in sales and use taxes, scheduled to be retired after 6 years, which, it was estimated, would raise another $36 million. $6 million would be earmarked for college scholarships for Birmingham students. $5 million would be used to supplement the annual budget for the Birmingham Police Department and Birmingham Fire & Rescue Service, covering the purchase of new computers, cars, and uniforms. $10 million would be put into an economic development fund, and $15 million would be used to improve maintenance of streets and sidewalks. Of that $15 million, $9 million would be split equally among the nine City Council districts, to be directed by individual Council members. Langford estimates that the streets and sidewalks fund would return $37.5 million in economic impact while the economic development fund would have a $25 million direct impact. The scholarship program is shown as providing an "immeasurable" economic impact, but if you accept a total impact of $100 million for that part of the proposal, then another $37.5 million in economic impact has been factored in from the scholarship program.

Together, both proposals would generate $72 million in public revenues and commit $72 million in public expenditures, preserving a balanced budget. The combined economic impact at the bottom of the page was given as $1.355 billion ("based on a multiplier of 2.5").

Later versions

After the distribution of the first summary, Langford provided additional information and changes to the Council. In two revisions to the first summary, the projected increase in revenues from business licenses was reduced to $28 million, with the shortfall taken out of the amount that would have been directed toward transit improvements. Chief of Staff Deborah Vance later explained that the difference would be made up with existing insurance license payments. The revised economic impact of that part of the proposal was amended to $1.29 billion, down from $2.06 billion, over the life of the project. Similarly the amount of projected economic impact from the sales tax increase was changed from $100 million to $62.5 million.

When pressed for other details about how the revenues would be allocated, Langford assured the Council that the details would be worked out later and that it was critical to implement the funding source in order to plan operations. At various times Langford indicated that the domed stadium would be built outside of the authority of the Birmingham-Jefferson Civic Center Authority and that transit spending would be handled by a new authority rather than the existing Birmingham Jefferson County Transit Authority. However, he also met with those groups, leaving the possibility of working with them open.

Passage

The revenue-raising elements of the Birmingham Economic and Community Revitalization Ordinance were passed in two separate votes on December 4. The 1% increase in sales taxes passed 7-0 with Councilor Valerie Abbott abstaining. The business license increases passed 6-1 with Joel Montgomery voting against and Abbott abstaining. William Bell was not present for either vote.

Collections

In July 2008 Chaz Mitchell, staff accountant for the City Council, reported that collections had fallen short of initial estimates by about $10 million. ($7 million in sales tax and $3 million in license fees).

Repurposing

After Langford was convicted of bribery and conspiracy and forced to leave office in 2009, fears about the status of the city's budget began to be realized. After two brief interim administrations, William Bell took office with a promise to immediately address the city's mounting deficit. The sales tax rate and license fees adopted by the ordinance were included in the 2011 Birmingham budget with very little of the revenues going toward the domed stadium or to transit improvements and none for college scholarships. Some on the City Council expressed a desire to roll back the increases now that those projects were off the table, but most recognized that the revenues were badly needed in order to prevent even sharper cutbacks in service and or layoffs.

References

External links

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