By Carolyn Cole
Published on February 7, 2008

A state question requiring cities with booming retail districts to share their sales tax revenue with other municipalities could be sent to voters in November.

If House Joint Resolution 1056, authored by Rep. Steve Martin, R- Bartlesville, makes it through the Legislature this session, the measure would call for a vote of the people to amend the state’s constitution to create the Municipal Sales Tax Redistribution Fund. Starting July 2009, 1 cent from each city’s sales tax would be placed in the fund and redistributed among municipalities, based on population.

For example, Mustang collects 4 cents of sales tax on each $1 of merchandise sold. If the Legislature and voters approve the proposal, Mustang would collect 3 cents, and 1 cent would be placed in the fund for redistribution.

Rep. Phil Richardson, R-Minco, said he is supporting the proposal and helped his friend write the measure. As a child, Richardson said his family was able to do almost all of their shopping in his hometown, Pocasset, but by the time he graduated from high school in 1960, Oklahomans’ shopping patterns started to change.

Interstates and highways made travel easier between towns, and large department stores and big box retailers sprang up near population centers and on highways, leaving rural Oklahoma towns, like Pocasset, Minco, Union City and Calumet, in the dust.

When Oklahoma’s constitution was written, Richardson said it made sense for town governments to receive most of their operational dollars from local sales tax revenue. As shopping patterns changed from local to regional, business dried up in many small towns, leaving municipalities without sales taxes to pay for infrastructure and provide services.

“We eliminated our business districts in so many of these towns and cities,” Richardson said. “Now they have no source of revenue to maintain their city.”

Meanwhile, booming metropolitan areas, county seats and towns along interstate highways or near tourist sites, such as lakes and rivers, receive a larger percentage of sales taxes because they are able to draw larger retailers, than their neighboring communities, Richardson said. Many of those dollars are spent by residents living in the smaller towns, he said.

Using Oklahoma Tax Commission data, 501 towns and cities levying sales taxes collected $1.2 billion in fiscal year 2007, or an average of about $460 per resident living in an incorporated area. Mustang received $6.37 million, or about $387 per resident, while El Reno received $6.2 million, or $382 per resident. Calumet received $119,402 in sales tax revenue in 2007, or about $222 per resident.

Union City has three main businesses producing sales tax revenue, a convenience store, gas station and grain elevator, Town Clerk Gina Dickerson said. Union City received $110,077 in sales tax revenue in fiscal year 2007 or about $79 per resident, less than 20 percent of the state average.

The only Canadian County community that isn’t a “donor city” is Yukon, Richardson said, which he attributed to the municipality’s location on Interstate 40, proximity to Oklahoma City and strong retail corridor. Yukon received $12.7 million in sales tax in fiscal year 2007, or about $571 per resident, which is $100 above the state average.

“Yukon is going to benefit from the citizens of Mustang ... you are going to pay the sales tax no matter where you live,” Richardson said.

Under HJR 1056, using fiscal year 2007 as an example, $190,000 would have been taken from Yukon’s sales tax revenue and redistributed to other municipalities. The amount is equal to about 1 percent of the city’s sales tax revenue. Under the plan, 59 municipalities would have lost revenue in fiscal year 2007.

Tulsa would have lost the most revenue at $16.1 million, or 8 percent. Oklahoma City would have lost $13.4 million, or 4 percent of its sales tax revenue.

While she agreed smaller cities need more operating dollars, Jane Abraham, Oklahoma City’s assistant to the city manager, said redistributing sales tax revenue isn’t the answer. She said legislators need to study how town governments are funded and diversify their revenue streams, possibly including property taxes, bringing the system more in line with structures used in other states.

“A more common financing model is to have a more balanced revenue base,” she said.

The proposal would take local control from City Council members and town trustees to determine how to use their revenue, Abraham said. City leaders also would have less ability to bring sales tax issues to voters, like MAPS and MAPS for Kids, to improve infrastructure. El Reno voters recently approved a sales tax issue to improve parks and the Jenks Simmons Field House and support economic development.

Oklahoma City taxpayers are also supporting sporting arenas, such as the Bricktown Ballpark, and events locations, including the Civic Center and Ford Center, which Abraham said draw residents from across the state.
“We are trying to bring people in from all over the place to enjoy coming here and being in Oklahoma City,” she said.

Meanwhile, Richardson said Minco and Union City are struggling to repair water systems and have little in operational funding to begin to cover the expenses. He said Minco can’t afford to curb and gutter city streets, and that often means residents’ homes flood when it rains.

“We are trying to get water,” he said. “I have a hard time feeling sympathy.”

Under the plan, Union City would receive $151,000 in additional sales tax revenue, more than doubling the amount the city received for fiscal year 2007. Dickerson said additional revenue would allow Union City to update waterlines and begin to address other needs. The town’s five full-time police officers and one part-time officer share city hall with the clerk’s office, and she said it gets cramped.

“We are the largest town in Canadian County area-wise,” she said.

If El Reno had received the additional $524,849 estimated for fiscal year 2007, City Manager Tony Rivera said the city would have used it to repair roads. He said the repairs could help improve traffic flows to local stores as well as attractions in other cities.

“We haven’t been able to make repairs to roads,” he said. “Most of the budget goes to normal operations.”
While Mustang would have received $615,222 under the plan, City Manager David Cockrell said he hasn’t reviewed the legislation.

“There is a point in the future we could be in the wrong side of the equation, where we are giving up what we have got,” he said, as officials hope to draw more businesses to Mustang.