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Commentary by Clarksville Now Editor-in-Chief Chris Smith:

Facing a serious financial crunch – some say a cliff – the City Council this week will vote on withdrawing from a local option sales tax agreement it made with Montgomery County almost 50 years ago, in 1977.

The idea is that the city would claw back a share of sales tax revenue it had agreed to send to public schools, phasing this in over the course of several fiscal years beginning in 2027. Seems like a reasonable idea: The county, not the city, is supposed to be the funding body for Clarksville-Montgomery County Schools. The county is flush with revenue right now, and the city is in dire straits. The fiscally responsible thing for the city to do is both cut where it can and maximize revenue where possible.

But there are two problems: One, the city might not have the legal authority to withdraw. Two, the city might not have the moral authority either.

Councilwoman Keri Lovato helped crystallize this issue at the Oct. 29 council meeting, where she presented a copy of the 1977 referendum that led to the local option sales tax agreement. “To me, that reads like in 1977, the voters did in fact vote to give that money to the school system. Now, if we can unilaterally pull out of this agreement without going on referendum, maybe we can, but I think it’s inappropriate,” Lovato said.

All this raises an interesting question: What was the 1977 referendum all about, and how big a deal was it that part of the city’s revenue would be going to schools?

Turns out, that vote 50 years ago was entirely about money for schools.

School overcrowding crisis in 1970s

In 1976, local school overcrowding had gotten so bad that the state commissioner of education had threatened to cut off state funding for Clarksville-Montgomery County Schools, according to reports from the time found in The Leaf-Chronicle archives. This looming threat prompted a yearlong study of how to raise revenue to build four – yes, four – new schools.

One big solution: A sales tax increase, which would have to be approved by Montgomery County voters in a public referendum. The referendum was for a three-fourths of a cent increase in the local option sales tax.

As reporting at the time explained, by state law, 50% of the revenue from the increase would go to the school system. The other 50% would be divided between the city and county governments, depending on where the sales tax was collected.

However – and this is the rub today – the Leaf reported on Page A1 March 6, 1977 (the Sunday before the referendum), “the city government has agreed to earmark 20 percent of its share of the revenue for instructional salaries in the school system’s general budget.”

Was 20% deal in referendum?

The text of the referendum was printed as a public notice in the Leaf on Jan. 25, 1977. It’s wordy and complicated, but the part applying to the city says, “The County Judge (the title at the time for County Mayor) is authorized and instructed to contract with the proper officials of the City of Clarksville to provide for the division of the half of the proceeds of the additional tax levied by this resolution not allocated to schools, as follows: 20% thereof to be earmarked for instructional salaries in the county’s general purpose school fund.”

So the 20% agreement was indeed part of the referendum text that was approved by voters.

But was agreement permanent?

In a Jan. 6, 1977, report, again on Page A1, the city’s agreement was described by the Leaf multiple times as “permanent.”

“The City Council will vote tonight on a resolution offered by Mayor Charles Crow to permanently use part of the city’s share of a proposed local sales tax increase for teacher’s salaries. … The mayor’s resolution calls for 20 percent of the second half of the revenue garnered from a County Court (County Commission)-proposed three-fourths of a cent sales tax increase to be permanently earmarked for teacher’s salaries.”

In other agreements in previous years, the city had included in the referendum text a time limit on its contribution agreements, but no time limit is listed in this one.

During the council meeting, Crow stated, “This (agreement) is the best way I know we can assist in a referendum,” implying that the city’s 20% agreement would be a factor in how people voted.

How sales tax referendum was debated

On March 6, 1977, the Sunday before the vote, The Leaf-Chronicle took a stand against the sales tax referendum. The entire argument of the editorial was focused on the sales tax increase going to schools.

“Funds must be raised somehow to fund the school improvement and expansion that state officials correctly insist upon. The money can be raised through the sales tax increase or through a property tax increase,” the editorial stated. There had been discussion that if the sales tax increase didn’t pass, the county would have to pursue a proportionally dramatic increase in the property tax.

The Leaf further said, “if the sales tax is passed, the revenue the schools receive would automatically wind up where it belongs, and could not be tinkered with by other government officials.”

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However, it said, “Officials estimate more than $500,000 of the sales tax revenue – or 34 percent – would go into city government for non-school use the first year alone. The city has yet to demonstrate any inescapable pressing need for additional funds. To sweeten the pot, city government has agreed to give (20%) of the tax for teacher salaries.”

Without the sales tax increase, county officials estimated they would need to increase the property tax rate from $3 per $100 of assessed value to $4.01. The Leaf argued that that would be a more fiscally responsible approach, rather than relying on the sales tax increase.

So, it’s not that the sales tax increase was for the city, and the 20% was to help make the increase more palatable for voters. In fact, it’s the reverse: The whole point of the sales tax increase referendum was to help the schools, and the additional city revenue was a byproduct.

How the public voted

The vote on March 8, 1977, was 2,160 for the increase (55.5%) and 1,732 against (44.5%). Voter turnout for this single-issue election was 15.1%. Passage cleared the path for immediate design and land acquisition for the school improvement project.

Wrong decision, but we’re stuck with it

This is a frustrating problem because, by rights, the city should never have agreed to permanently hand over tax revenue to the schools, making itself responsible for something that, under state law, should be the county’s responsibility. At the least, the city should have included a time limit on its obligation.

However, the sales tax referendum in 1977 that gave the city that extra revenue was not presented to voters as a way to raise city revenue. Voters were approving a measure to fund schools. Period. If we’re going to walk that back, we need to walk back the entire thing, not just the city’s 20% obligation.

Financially, ending the agreement and recapturing that revenue is the responsible thing to do.

Legally, it might be possible – that’s up to the attorneys.

But morally, reversing a measure that was approved by voters 50 years ago is wrong. If you want to do that, we need another vote.

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