Lawmakers to Weigh in on Shelby Decisions

ANDY MEEK

The Daily News

The new year is off to a roaring start for Tennessee legislators in Nashville, who officially get down to business at the end of month.

Already, a slew of headline-grabbing issues are dominating business in the states capital, many of which involve funding for Shelby County. County officials will decide next month if they want to ask legislators to allow the county to levy an adequate facilities tax on new development, a measure being sought by county leaders to provide property tax relief.

Revenue issues. Kevin Gallagher, assistant to Shelby County Mayor A C Wharton Jr., said the County Commission also will discuss a countywide tax on real estate transfers Monday. The commissions legislative committee agreed to ask legislators for the tax last month; however, the decision was not unanimous, a factor Mondays discussion is intended to address. The tax is expected to generate about $18 million a year.

On the city side, Memphis is looking to gain about $1 million by asking legislators to eliminate a 1 percent handling fee charged by the Shelby County Trustees Office, which transfers taxes back to the city after they are collected by the state on behalf of Memphis and sent to the trustee. And Memphis Mayor Willie Herenton is renewing his push to consolidate city and county governments and schools, a proposal state Sen. Mark Norris, R-Collierville, plans to oppose by introducing a bill to freeze the county school systems borders.

And lawmakers learned of another ominous issue earlier this month when they convened temporarily Gov. Phil Bredesen announced that almost one-fourth of the 1.33 million TennCare enrollees will be dropped from the statewide health insurance program.

Setting priorities. Lawmakers are still deciding which issues they will choose to address in the upcoming legislative session. Rep. Paul Stanley, who represents Germantown and Cordova in District 96, said hes not willing to consider new taxes or consolidation until the states capital funding formula for school construction is changed, something he said has heavily contributed to Shelby Countys $1.7 billion debt.

On the other hand, Rep. Mike Kernell, who represents the University of Memphis area in District 93, said TennCare is the most pressing issue facing legislators.

For every dollar that the governor cuts from TennCare, the state loses three dollars for health care, said Kernell, chairman of the House Government Operations Committee. Instead of getting matched money from Washington to grow our Medical Center, well be faced with non-paying patients going bankrupt, increasing property taxes and cost-shifting. Thats how serious this is. This overrides everything.

A recent shift in the states political landscape could bring some new solutions to old issues. Following big election wins, Republicans in the state senate are set to enjoy their first elected majority since the end of the Civil War. And Shelby County lawmakers have picked up more leadership spots than representatives from any other region of the state.

Real estate debate. At the local level, one item that has garnered much discussion is a proposed adequate facilities tax. According to the countys legislative wish list, the tax would be levied on new developments to help fund the public services and facilities associated with them. Residential developments would be taxed at $500 per lot, increasing by 6 percent over 13 years. The tax is expected to generate between $5 million and $8 million per year.

Reaction to the tax has been mixed. Developer David Goodwin Jr., who opposed a similar tax that recently was passed in Fayette County, said he opposes the tax in Shelby County but thinks it stands a good chance of being approved. Thats in part, he said, because opponents to the tax have not been particularly vocal.

The truth of the matter is that we tried to get the Memphis Area Home Builders Association and the state and national groups to all kick in on this fight, and nobody was really willing to do much other than a little lip service, he said. You know, it is a tax, whether people realize it or not. It was right there in our back yard, and now its in the house.

We were unable to really stop it out in Fayette County. We hired a lawyer, but there just seems to be no way to undo what they have done. I guess its just a tax well all have to grin and bear.

Driving competition. Stanley said a similar tax in Shelby County could serve as one more incentive for businesses to set up shop outside the county. Shelbys high property taxes already have been cited as the reason behind several companies recent move to DeSoto.

I asked Wharton about this, and he said, Well, you cant say the adequate facilities tax is driving people to DeSoto county, because we dont have one, Stanley said. However, if you implement that, youre not raising a lot of money youre just kind of putting a Band-Aid over the wound. And B, that gives people one more reason to go to DeSoto County, and I dont think we want to do that, either.

Raising funds. On the other hand, Jim Huntzicker, Shelby County director of administration and finance, said the tax would bring some benefits to the county, the most significant being its size and ease of collection. Thats important, he said, because the county is not only dealing with a heavy debt load but also an increasing debt service, the amount the county must pay to its creditors.

We need $20 million in new revenues from some source, be it those two taxes or some other source, to initiate a longer-term debt-reduction plan, Huntzicker said. Its very important that that happen.

Already facing a tight budget, Whartons administration believes an additional $9 million will be needed to fund county operations and $10 million for debt service. Both the city and county school systems also are expected to request more funding, something that is not figured into the countys current budget shortfall.