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VOL. 123 | NO. 50 | Wednesday, March 12, 2008

Economists, Officials Come to Grips With Stark Realities

By Andy Meek

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It was fitting that a panel discussion at the University of Memphis about Shelby County's eroding tax base was held in a conference center building on a street called Innovation Drive.

Because as economists, real estate officials and officeholders in local government continue coming to grips with the bleak financial picture facing the county, a consensus is emerging that bold new ideas will have to be put on the table.

For many elected and appointed local leaders, however, such belt-tightening ideas are proving to be elusive. Monday's roundtable discussion at the U of M offered plenty of examples why. And it gave a preview of what will be on the minds of elected leaders on both sides of the Main Street Mall once budget committee discussions start in the next several weeks.


'A serious problem'

The roundtable was convened at the behest of Shelby County Mayor A C Wharton Jr., who recently suggested the local economic situation is so dire that he at times loses sleep over it. Debra Gates, chief administrative officer for the Shelby County Trustee's Office, echoed that thought this week.

"I don't know about you all, but I'm totally depressed now," Gates told the U of M audience as she began her analysis of property tax collections, the roundtable's last agenda item.

One theme that quickly emerged this week is that the hands of local government are tied - particularly on the county side - when it comes to what its officials can and can't do to set their budgets. That's partly why members of both the city and county administrations recently acknowledged that the usual mix of spending cuts and new revenue sources they pursue likely won't be enough to balance their budgets in the coming fiscal year.

The Shelby County Assessor's Office, for example, can't directly take foreclosure sales into account when valuing property. By law, the assessor's benchmark has to be what a willing seller would get from a willing buyer.

Nevertheless, foreclosures have gradually eroded the tax base. Foreclosure notifications in Shelby County jumped 152 percent between 2000 and 2007, Monday's audience was told by Dr. Phyllis Betts, an urban affairs and public policy professor at the U of M.

An even grimmer statistic she presented is that one of every three ZIP codes in Shelby County is at high risk for foreclosure.

"We've all seen the news stories about the trouble in the mortgage market," said the county's chief administrative officer Jim Huntzicker. "The impact here could be huge. Just a 1 percent drop in assessments would cost $6.5 million. That's a serious problem."


Confronting reality

That's also led to some hand-wringing about the future, especially over the countywide reappraisal of property scheduled to occur in 2009. For the first time in recent memory, next year's reappraisal is expected to result in no net growth in the local tax base, county officials have begun to acknowledge.

The most recent countywide reappraisal, by comparison, was in 2005 and saw a mixture of rising home values and an explosion of building activity in the suburbs result in a 12 percent increase in the tax base. The reappraisal occurs every four years.

"Shelby County is going to have the most challenging reappraisal it's ever had," said Shelby County Property Assessor Rita Clark. "And our hands are just tied."

In an interview with The Daily News prior to Monday's roundtable, Wharton attempted to explain why that's the case. His office has received several calls and e-mails from citizens asking why enough cuts can't be made to bring the budget into balance.

"We have cut and we will continue to cut, but even after that we won't be able to fill the gap, because those areas in which we could really whack, if you will, are out of bounds. They're off limits," Wharton said. "For example, $2.02 of the tax rate comes right off the top to go to schools. The elected officials even all have the right, if we cut them, to petition a court and get those cuts restored."

From public school expenses to the cost of law enforcement, the county mayor said he's scaled back the county's operation as much as he can.

"Especially when it comes to the jail and law enforcement, do you think the public is really ready for me to start cutting there?" Wharton said. "The jail population is getting up to higher now than it's ever been, and I'm not going to cry about that. Because if you see what they're pulling off our streets - if it means more money for the jail, then hey, I'm up for that.

"Then of course it doesn't stop in jail. You've got to prosecute them. (Shelby County District Attorney General) Bill Gibbons' staff is increasing, and I'm not going to cry about that. Then if you prosecute (criminals), you've got to defend them, so the public defender's office needs increasing, and I'm not going to cry about that. Then you've got to have clerks, deputy jailers, correctional officers - and that's all just one area."

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 0 19 170
BUILDING PERMITS 0 305 3,056
BANKRUPTCIES 20 118 736
BUSINESS LICENSES 27 53 329
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0