Administration Wants to End Special Tax Incentive for Border Cities

Tennessee cities near bordering states would no longer be able to reroute sales tax revenue for private development projects. Legislation has surfaced in the General Assembly to undo tax incentives created just last year.

It’s called “tax increment financing,” widely used in Nashville to encourage development downtown. But in Davidson County, the tax breaks are based on a local tax.

In the waning hours of last year’s General Assembly, lawmakers created a way for border cities to funnel state tax revenue to certain projects. Revenue Commissioner Richard Roberts says the administration wants to pull the plug.

“Sixty-seven or 68 percent of the state’s revenue is sales tax, and you can start giving it away, but you need to be careful about how you do that.”

In a House subcommittee, lawmakers unsuccessfully tried to maintain the special tax increment financing for Clarksville – near the state line with Kentucky. Some border cities have completed financing deals with the sales tax. They’re primarily in upper East Tennessee.

The so-called “Border Regional Retail Tourism Development District Act” was estimated to cost $5 million a year.