Politics
Tennessee Local Revenue Sharing Act of 2026 Adjusts Memphis Budget Allocations
Memphis residents will see shifts in city service funding starting July 2027 as the state applies a new formula for distributing sales tax revenue to Shelby County.
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How we reported this
The Tennessee General Assembly passed the Local Revenue Sharing Act of 2026 during its June session, changing how a portion of state-collected sales taxes reaches Shelby County and the city of Memphis. The law updates the distribution formula used by the state comptroller to allocate funds based on population and economic activity data from the 2025 census. Memphis city officials estimate the change will affect roughly $28 million in annual transfers previously directed through the old system.
State lawmakers approved the measure to align revenue sharing with updated growth patterns across Tennessee counties. Memphis, which relies on these transfers for portions of its general fund, now faces a recalibration that the Department of Revenue projects will take effect with the 2027 fiscal year. Local budget documents show the city used similar transfers last year to cover 14 percent of public works expenses.
Effects on City Services and Household Costs
Memphis residents who use public transit or rely on road maintenance crews will notice the first direct changes. The legislation requires Shelby County to apply the revised revenue share to its existing contracts with the Memphis Area Transit Authority. Under the new rules, the authority expects to receive $4.2 million less than the amount projected in its March 2026 operating plan, according to agency filings submitted to the city council. This adjustment could influence route schedules on lines serving the South Memphis and Frayser neighborhoods.
Property owners may also encounter changes in how the city covers sanitation and stormwater fees. The Memphis Public Works Division has listed the revenue sharing transfer as a line item that offsets 9 percent of its annual collection costs. With the formula change, division managers have stated in public budget workshops that they will review fee structures before the next billing cycle in January 2027. No immediate rate increase has been approved.
The state Department of Revenue will issue the first adjusted payments under the act on 1 July 2027. Shelby County government must submit revised spending plans to the comptroller by 15 March 2027 to confirm compliance with the new allocation rules. City council members have scheduled three public hearings on the topic beginning in September 2026 to gather input on service priorities before final budget decisions.