Photo by Jon Anderson
Shoppers check out groceries at the Walmart Neighborhood Market on Lorna Road in Hoover, Alabama, on Sept. 13, 2023.
The Hoover City Council on Monday night voted 6-0 to lower the city’s sales tax on groceries by half a percentage point from 3.5% to 3%, effective a year from now.
The tax reduction, which goes into effect Oct. 1, 2024, is designed to give people some relief from inflation, said Hoover Councilman Casey Middlebrooks, who introduced the measure two weeks ago.
It follows a similar move by the state Legislature, which in June voted to reduce the state portion of sales taxes on groceries from 4% to 3% — a change which took effect Sept. 1.
The state will drop its sales tax rate further to 2% on Sept. 1, 2024, as long as revenues for the state Education Trust Fund grow by 3.5% this fiscal year.
The Legislature authorized municipalities to reduce their sales taxes on groceries in 25% increments in any year when their local revenue exceeds 2% over the previous year. However, any change must be approved at least 60 days before the beginning of a new fiscal year on Oct. 1.
The Hoover City Council missed that opportunity, so its sales tax reduction won’t take effect for another year.
The reduction in Hoover sales taxes on groceries would amount to an average savings of $17.65 per Hoover resident per year.
“It doesn’t sound like much, but when you combined them all [state and municipal reductions], every little bit adds up,” Middlebrooks said. “For some families, every dollar is counted.”
The city of Hoover could have reduced its sales tax rate by .875% this year, which would have cost the city about $2.6 million in revenue, according to a study by a retired economics professor from the Auburn University at Montgomery.
However, the Hoover City Council chose instead to cut its rate by .5%, which is expected to cost the city about $1.6 million the first year it takes effect.
Curt Posey, the Hoover council president pro tempore and chairman of the council’s Finance Committee, said it’s possible Hoover could make further cuts, but city officials want to see what kind of an impact this first cut has on the city’s finances.
“This is a first step,” Posey said. “I think we’ll get there.”
The study by consultant Keivan Deravi predicts that spending on groceries in Hoover should reach $334 million in 2025, or $3,531 per resident, assuming a 4% inflation rate. Under the current city sales tax rate of 3.5%, that would generate about $11.7 million in tax revenue for the city in 2025, but a 3% tax rate would generate about $10 million.
It's likely that people would spend some of their tax savings buying more groceries or other retail items, so the negative impact on tax revenues could be less than $1.7 million.
The last change in the Hoover sales tax rate occurred in October 2018, after the City Council raised the rate from 3% to 3.5%. That put the overall sales and use tax rate at 8.5% in the Shelby County part of Hoover and 9.5% in the Jefferson County part of Hoover.
Following the Sept. 1 change at the state level, the current overall sales and use tax rate on groceries is 7.5% in the Shelby County part of Hoover and 8.5% in the Jefferson County part of Hoover.
However, sales taxes on items other than groceries have not been impacted. Total sales taxes on other items in Hoover remain at 8.5% in the Shelby County part of Hoover and 9.5% in the Jefferson County part of Hoover.
The state legislation that passed this year and the new Hoover ordinance that passed Monday night follows the same definition for groceries as the federal Supplemental Nutrition Assistance Program, better known as SNAP. SNAP foods include fruits, vegetables, meat, poultry, fish, dairy, breads, cereals, snack foods, non-alcoholic beverages and the seeds and plants that produce food.
The amount of revenue Hoover receives from sales and use taxes (of all kinds) has increased from $60.5 million in fiscal 2012 to $106 million in fiscal 2022, records show. City officials fully expect to exceed that dollar amount in fiscal 2023, which ended Sept. 30.
Posey noted that it’s unusual to see governments lower tax rates.
In other business Monday night, the Hoover City Council terminated a tax abatement agreement for Lake Homes Realty that was approved by the council in February 2022 in connection with a relocation and expansion of the company to Meadow Brook Corporate Park.
The agreement that was approved by the council in 2022 waived an estimated $80,000 worth of construction-related sales taxes that were to be spent on the expansion, plus about $23,000 in non-educational personal property taxes. However, the legislation that allowed the tax abatement was designed to be used for purchases, and Lake Homes Realty decided it would be less expensive to lease space and equipment, so the expansion costs were no longer eligible for tax abatements, said Greg Knighton, the city of Hoover’s economic development manager.
Lake Homes Realty still is moving forward with its plans to bring 300 or more new jobs to the city, Knighton said.
The Hoover City Council also on Monday:
- Accepted a $15,000 grant from the Jefferson County Commission to assist with the operation of the Hoover Senior Center.
- Approved a license for Barrister’s Tavern to sell liquor at 1535 Montgomery Highway.
- Approved a license for the Moss Rock Festival to sell alcoholic beverages during its event at Hoover Metropolitan Stadium on Nov. 4-5.
- Renewed a general liability and property insurance policy with Liberty Mutual Insurance for the Hoover Historical Society, which preserves certain documents for the city.
- Renewed a directors and officers insurance policy with Ace American Insurance Co. for the Hoover Parks and Recreation Board.
- Agreed to hire Pritchard Industries to provide cleaning services for Hoover Metropolitan Stadium, Finley Center, Aldridge Gardens, Hoover Randle House, Hoover Lakehouse and baseball, tennis and multipurpose complexes.
- Accepted a change order in a contract with Norris Paving that reduces the cost for adding a turn lane from Alabama 150 onto Whisperwood Drive by about $47,000, with a final cost of $501,001.
- Accepted a change order in a contract with Avery Landscape & Associates that reduces the cost for building a sidewalk on Inverness Center Drive by $50,486, with a final cost of $277,257.
- Declared a property at 3469 Birchtree Drive as a public nuisance due to high weeds and/or grass but held off on declaring a property at 4846 Sulphur Springs Road as a public nuisance until the council can learn more about whether the city is partly to blame for the condition of the backyard at the residence. The council in April 2022 agreed to pay up to $20,000 to clean out and repair a stormwater drainage pipe on the Sulphur Springs Road property because it was causing a problem that impacted a public road, but the work has never been done. Hoover City Attorney Phillip Corley said his office is negotiating with the property owner about the work.
The entire Oct. 2 Hoover City Council meting can be viewed on The Hoover Channel YouTube page.
