Property Tax Complicates Sales Tax Considerations

By Bill Dries

VIDEO

Whether it is a tax hike or a tax rate hike, Memphis Mayor A C Wharton Jr.’s proposed 28-cent increase in the city property tax rate has complicated the idea of a half-percent city sales tax hike to go on the ballot later this year if the property tax hike sticks.

That’s according to the two City Council members sponsoring the ballot question.

FLINN

“We were operating under the assumption that the mayor was going to propose a budget at $3.11 – not raise our tax rate,” said City Council budget committee chairman Jim Strickland on the WKNO-TV program “Behind The Headlines.”

HARRIS

“We knew the county was going to raise the tax rate,” he said. “And then the city would raise the tax rate and then a few months later, we would ask the citizens to raise their sales tax rate. I’m not so sure the city would vote for that.”

STRICKLAND

The program, hosted by Eric Barnes, publisher of The Daily News, can be seen on The Daily News Video, www.memphisdailynews.com

Strickland and fellow council member Shea Flinn delayed a vote on third and final reading of the referendum ordinance until after the July 1 start of the new fiscal year when the property tax question will have been settled.

Both say it is incumbent on the council to approve a property tax rate that is below the $3.39 rate that Wharton has said is a “continuation” budget that only restores revenue lost in the 2013 property reappraisal for taxation purposes.

“If taxes go up on the property side then it appears to any rational voter that we are just playing shell games with the money,” Flinn said of a move to increase the sales tax rate for the city and then roll back the city property tax rate after the property tax rate has increased.

Meanwhile, in his April budget address, Wharton pushed the idea of a half-cent sales tax hike emphasizing that $27 million of the estimated $47 million in new revenue it would create would fund an expansion of pre-kindergarten in the city with a program independent of the countywide school system.

The remaining $20 million in revenue would be used for a 20-cent property tax rate rollback.

Like Flinn and Strickland, council member Lee Harris was also critical overall of the administration’s budget priorities but charted a position closer to the middle on the property tax rate.

“I want to hear them articulate a vision of where they are going to take their division and where they are going to take the city,” Harris said of division directors who are making their cases to the council budget committee. “So, right now I’m not satisfied. I’m not going to do a double whammy. A double whammy for me is a tax hike and people don’t get the government that they want.”

Hearings by the City Council budget committee resume Tuesday, May 14, at City Hall.

The Tuesday afternoon schedule includes a look at the 2013 property reappraisal, which saw a drop in property values. The drop has forced city and county governments to consider higher certified property tax rates to make up for the revenue lost by the reappraisal with the existing property tax rates.

“I count a tax increase as anything over our $3.11 tax rate,” Strickland said. “(Wharton) calls it an even rate or even collections. I call it a tax rate increase and that’s where the battle will be.”

Flinn acknowledges a $28 million drop in revenues from the property reappraisal that has to be made up just to produce the same amount of revenue the city now gets from the existing $3.11 property tax rate. But he adds that some taxpayers would pay more in taxes with a 28-cent increase in the tax rate.

“You get to what we know now is a 2.3 percent decrease in property values. You also have to put in there 3.5 percent for appeals,” Flinn explained. “You are looking at a 7.2 percent increase or about $28 million. If you’re looking at your new assessment and you didn’t go down 7.2 percent or more, it would be a tax increase for you. We know commercial properties went up in the valuation.”

Harris puts himself in the middle of a council divide between a tax increase and a further tax rollback in a series of rollbacks the council approved starting in 2008.

“I think both camps are right. I think we are spending a lot of money in places we shouldn’t be spending it and think we should be redirecting some of that money to some services,” he said, putting city funding of the city-county Economic Development Growth Engine at the top of his hit list, calling it “an elaborate corporate welfare program.”