VOL. 129 | NO. 75 | Thursday, April 17, 2014
Council Questions Five-Year Wharton Plan
By Bill Dries
It’s usually a quick bottom line for any local government budget proposal – does it mean a property tax hike?
The $596 million operating budget submitted to the Memphis City Council Tuesday, April 15, by Memphis Mayor A C Wharton Jr. does not include a property tax hike.
But you can expect several council members to continue talking about a tax hike when the budget goes to the council’s budget committee starting April 29.
The discussion about a property tax hike will center on the timing of how fast the city should up its annual pension contribution from $20 million to $100 million.
Wharton has outlined a ramp-up period over five fiscal years starting with the fiscal year that begins July 1 in which the city diverts savings and other efficiencies toward the increase.
Council member Shea Flinn points out that the October 2015 city elections are during the second fiscal year of that period. The elections will be a sea change in city politics possibly affecting the council’s will to make cuts in the last three years. Many council incumbents elected in 2007 and re-elected in 2011 will be running for their last four-year term under term limits provisions that began running with the 2011 elections.
Wharton has also indicated he will be running for re-election in 2015 and term limits would also apply to him.
“If you’re cutting $15 million a year, you’re going to cut the lowest-hanging fruit. … Every year it’s going to get harder and harder. The problem is going to be costing more money the longer we take to deal with it,” Flinn said. “In October of 2015, everyone will be elected or defeated or whatever and the majority of them will be term limited. That is the perfect storm for a monster tax increase.”
Wharton has said anything shorter than a five-year ramp up would be too painful and affect the delivery of vital city services as well as his concept of dealing with the unfunded pension liability as the city continues to pursue economic development projects.
Council Chairman Jim Strickland cites the city elections in year two of five years of hard decisions.
“It kicks it past the next election. Of course there’s no tax increase this year because he’s only funding $15 million of the $80 million debt,” Strickland said of Wharton’s proposal.
Strickland said he didn’t know if a two-year ramp up would mean a property tax hike.
“I can guarantee you if we pay it over five years there will definitely be a tax hike and huge,” he said. “That leaves a $50 million deficit after the election and it’s my belief that will be a 40- to 50-cent tax increase in two years.”
Wharton has already sent a set of ordinances to the council that would switch city government new hires and existing city employees with less than 10 years of services to the 401(k)-like defined contributions plan. Those vested city employees with 10 years or more on the job would remain in the existing defined benefits plan that Wharton argues is a prime driver behind the city’s financial crisis with all city employees included.
The ordinances would undergo three readings and Wharton urged the council to begin voting on them “as soon as possible.”
The health care plan changes for retirees, which were first released to retirees last week drew a packed committee room Tuesday during the council’s executive session.
Retired Memphis Police detective Mike Lee of the Association of City Retired Employees said the plan would cause “chaos” for retirees who would be paying much more for health insurance.
“This is going to be their whole check,” he told the council. “This ain’t just numbers anymore. … These are real people.”
Memphis Fire Fighters Association President Thomas Malone indicated a city change of that nature could become part of a federal court lawsuit already pending for several years over the 4.6 percent pay cut city employees took several fiscal years ago.
“This is a contract under Tennessee law,” Malone said of the health benefit election form. “We think we have a contract.”
Council member Bill Boyd said he couldn’t vote for such changes.
Council member Lee Harris, who is chairman of the budget committee, agreed.
“Some things we are going to have to dial back a bit,” he said. “And those some things are probably going to include things like raising the premiums on retirees who can’t get back into the workforce and have already given the city decades of service and who we’ve made promises to.”