No action on cig tax, alternatives discussed

After hearing from multiple business owners in town who opposed the proposed $0.30 per pack, $3 per carton cigarette tax, the South Hill Town Council chose to take no action on the cigarette tax at Monday’s meeting while exploring other options to raise revenues to fund its fiscal year 2017-18 budget.
Later in the meeting, Town Manager Kim Callis argued the merits of a cigarette tax while council member Lillie Feggins-Boone argued against a cigarette tax, saying it would disproportionately affect the black community. Other council members talked of the alternatives for raising the needed revenues, which Callis has said would be used to fund enhanced law enforcement retirement (LEO) benefits and new information technology systems for the police department. The alternatives discussed included raising various tax rates, such as personal property, real estate and/or meals and lodging, or developing a hybrid plan that involves a reduced but still present cigarette tax coupled with a tax increase in another area, such as personal property.
While Feggins-Boone, property owner Willie Bob Smith and other public speakers arguing against the cigarette tax repeatedly said the cigarette tax would drive business away from town and asked the council to spread the burden beyond just those who sell and smoke cigarettes, Callis argued that a cigarette tax would spread the burden beyond the town’s residents, property owners and businesses to those who utilize town services and facilities but don’t live in town or own property or businesses here.
Callis acknowledged that C&M Tobacco owner Dale Cutler said two-thirds of the customers who signed his petition against the cigarette tax were from out of town, and Callis said two-thirds of the town park users are from out of town.
“It is a way for us to help broaden a limited tax base and spread it out a little bit more,” Callis said. “We would get a little bit of help from people who live out of town paying the cigarette tax.”
Callis acknowledged that a cigarette tax could have an effect on some of the businesses in town and stressed that it should be set “at a level that is not a deterrent from somebody changing their purchasing habits, as some of the people in the audience contend that it will.”
“If we don’t charge 30 cents and we come down to something lesser, 15 cents or 10 cents, and then we go up some on personal property tax, we are I think fulfilling our responsibility to the citizens to try and keep all taxes as low as possible,” Callis said. “But it is fair, because a lot of people who are paying the cigarette tax aren’t paying us anything otherwise, but they do use or parks and they drive on our roads and they use our facilities, and we’re not asking a lot from them by doing that.”
Callis said the town based its proposed cigarette tax on information from other towns in Virginia that have implemented a cigarette tax.
“No matter whether the tax went up or down, it was still significant dollars for every town that had the tax,” he said.
In regards to raising taxes on town residents, Callis reminded that with Mecklenburg County’s elimination of vehicle decals, the town of South Hill has lost its most effective tax collection tool. Furthermore, he said upcoming school construction and renovation projects in the county will be paid for through tax increases.
Callis said covering a budget deficit from the fund balance is not good practice and recommended against raising real estate taxes because surrounding towns such as South Boston, Farmville, Clarksville and Lawrenceville already have lower real estate tax rates than South Hill. He said raising the machinery and tools tax would hurt industrial development and that the town’s restaurants and hotels oppose raising the meals and lodging tax.
Callis said there is some wiggle room with the town’s personal property tax rate. He said with a hybrid plan that includes a lower cigarette tax than what was originally proposed coupled with a personal property tax increase, the personal property tax rate would go from $1.05 per $100 valuation to potentially $1.50. With no cigarette tax, the personal property tax rate would have to go to between $1.80 per $100 valuation and $2.00, Callis said.
“Let’s try this (cigarette tax) and see how it works,” Callis said. “We might find that in a couple of years, it’s not something we want to do. We might find that it’s something we should be doing and should have been doing longer.”
Feggins-Boone said she prefers any tax increase to implementing a cigarette tax, which she said would disproportionately affect minorities who walk to the stores.
“The majority of people who go in there to buy cigarettes by the pack are black,” she said. “We’re the ones who are going to be taxed, and we’re paying for benefits for everybody in the town. It’s not fair to us.”
Council member Leroy Sasser said his preference is to raise revenues from the meals and lodging tax.
Council members Ben Taylor and Millie Bracey predicted if the town tries to raise the personal property or any other tax rate, there will be a room full of people at the next public hearing speaking in opposition.
Council members Mike Moody, Glenn Allen and Deloris Luster said they’d be open to a hybrid plan that includes some cigarette tax and some other tax increase.
During the cigarette tax public hearing earlier in the meeting, Cutler, owner of C&M Tobacco of South Hill, said he would have no choice but to relocate his store if the cigarette tax is approved, and he believes his customers would come with him.
Cutler presented the council with a petition signed by 760 local and out-of-town customers who are against the cigarette tax. He said two-thirds of the people who signed his petition are from outside South Hill, and he has been told by numerous customers that if the cigarette tax is put in place they will not be making the trip to South Hill to do their business.
Former Lacrosse Candy Co. owner and Virginia Wholesalers Association president Bob Tanner said cigarettes are a large part of convenience store sales, and a tax on cigarettes will result in a loss of overall sales. Tanner said he believes that implementing the cigarette tax would result in cigarette purchasing customers taking their business elsewhere outside of the town of South Hill.
Hermie Sadler of the Slip-In convenience stores said he spoke from experience with a similar situation in Franklin and how it affected his convenience store there. He said it went from being one of his best to now being on its third tenant because tenants cannot afford to pay rent due to lack of sales. He said the store in Franklin saw a drop in sales of almost 50 percent.
Jay Jennings spoke on behalf of the Virginia Tobacco Growers Association in opposition of the cigarette tax. Jennings said 25 to 30 million pounds of tobacco flows through South Hill, and with that comes workers of tobacco that spend their money in South Hill. Jennings said it will be hard to support businesses that deal with the tobacco industry when the town is placing penalties in the form of the cigarette tax that affect the livelihood of tobacco growers, workers and other related businesses.
Eddie Callahan, a local tobacco farmer, said it would be detrimental for anything to affect the livelihood of tobacco industry. Callahan said he knows tobacco laborers that will travel into South Hill to do their shopping, and he would hate to see the revenue of the town drop because of this cigarette tax.
Tobacco farmer Glenn Hudson said he is concerned for the industry. “What I’m asking you all to do is, let’s don’t be one to help drive another nail in the coffin that is trying to do away with our business. We depend on these merchants to sell our product.”
Jimmy Thompson looked at the tax as a preventative measure. He said the cigarette tax may prevent some child from smoking.
Council member Mike Moody said this is the toughest decision he’s had to make since he’s been on the town council and said he felt it would be a slap in the face to the Tobacco Commission that has provided much funding to the town over the years to impose the cigarette tax.