Shelby County sponsor wins committee OK to seek voter referendum on temporary sales tax for new jail

Vice Chairman Chris Gillespie told the City-County Subcommittee on Feb. 26 that House Bill 308 would let Shelby County voters decide whether to raise a local-option sales tax to pay for a new county jail. The measure would authorize a referendum limited to Shelby County; the tax would sunset after eight years or when debt is repaid, whichever comes first.

The bill’s sponsor said the county’s jail is “beyond falling apart,” cited recent lawsuits and said a referendum is the least permanent option to raise the needed funds. Gillespie said the local-option portion would be increased to 3.75 percent, producing a combined local-and-state rate the sponsor described as “about 10.75 percent.” He said the tax would have a hard sunset of eight years at most.

The committee spent substantial time questioning how long the tax would last, whether the plan accounted for inflation and the projected revenue. Gillespie said the proposal was intended to cover estimated construction costs and that “we think we can build it in less than 8 years.” When asked whether the proposal included inflation adjustments, Gillespie said the plan would “provide enough revenue to cover, even some of the more abstract building increases.” He did not provide a line-item inflation schedule.

Members raised equity and cross-border concerns. Representative Mitchell warned that sales taxes are regressive and asked what the total combined sales tax would be; the sponsor gave the combined estimate during the hearing. Several members noted that raising local sales tax near state borders can shift purchases across state lines. Representative Crawford asked the sponsor for an explicit eight-year revenue projection; the sponsor estimated “a little over a billion dollars” but said he would provide a specific total to the committee chair.

Vice Chairman Wright emphasized that the bill only authorizes a referendum — it does not mandate a tax increase — and noted the amendment cites the Tennessee Code Annotated for carrying out the referendum. The committee added an amendment to delay the bill’s effective date to give the Department of Revenue more time to prepare its systems.

On a roll call, the clerk reported 3 ayes, 2 noes and 2 present-not-voting; the ayes prevailed and HB 308 moves to the next available calendar of state and local government.

The bill remains a local option: if the referendum passes in Shelby County, the tax would apply in the county (including municipalities inside it). The bill does not compel other nearby jurisdictions to act, and committee members noted potential cross-border shopping effects. Sponsor Gillespie said the referendum language will reference TCA procedures for referenda.