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VOL. 127 | NO. 77 | Thursday, April 19, 2012

Tax Hike At Center Of Budget Debate

By Bill Dries

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Even as he made his case for a 47-cent property tax hike Tuesday, April 17, Memphis Mayor A C Wharton Jr. outlined alternatives to the full tax hike.


“This is a product in progress,” he said after his annual budget address.

Wharton’s formal presentation was followed by comments from several council members who indicated a tax hike is far from a sure thing.

When council budget committee hearings begin on April 28, council member Jim Strickland will chair the committee. And Strickland was the first on the council to voice criticism of the premise behind the tax hike.

“This is the largest budget in the history of the city of Memphis,” Strickland said. “We need to start with the belief that Memphis and Memphians cannot afford a tax increase.”

Strickland said an increase in what is already the highest property tax rate in the state of Tennessee could prompt more Memphians to leave the city.

But council member Joe Brown denied there was such an exodus.

“Nobody’s going to leave Memphis,” he said. “That’s just a myth for those who want to keep Memphis stagnated.”

Brown said he would oppose any layoffs or pay reductions.

“People pay taxes for services. We must deliver them,” he said. “Not one member of this body has the right to threaten another person’s livelihood. … A few nickels and dimes is not going to hurt.”

Council member Janis Fullilove suggested the city push for legislation to approve a payroll tax that past legal opinions by the state Attorney General’s office have held would have to apply to Memphians as well as those not living in Memphis who work in the city. Council member Kemp Conrad said the city’s budget process has been “rather dysfunctional” in recent years with “lots of crazy questions about food and travel.”

“We should right size city government once and for all,” he said. “If we can’t get this budget right this year, we don’t deserve another year.”

Unlike past years, Wharton is terming his budget proposal for the fiscal year that begins July 1 a “one-time gap budget.” The tax hike is exclusively to fund money the city owes Memphis City Schools.

A month after the fiscal year covered by Wharton’s budget proposal, Shelby County’s two public school systems will merge and Wharton says that is when the city’s $70 million obligation to fund public schools comes to an end.

Some working on the merger process have questioned whether that is the case as recently as last month. But they haven’t had a definitive answer from their attorneys.

Wharton says he is certain.

In his August 2011 ruling in the schools consolidation case, Federal Court Judge Hardy Mays included among the 16 summary points in his ruling that: “The City of Memphis has the obligation during the transition process to maintain its funding of the Memphis City Schools. All amounts owed by the city of Memphis to provide for the education of Memphis school children remain due.”

The 10-point agreement among all of the parties that followed in September on terms of the transition and was accepted by Mays reads, “There shall be no change in the financing of the two school systems pending the combination of the systems at the start of the school year in 2013.”

That would be in August 2013, about one month after the end of the fiscal year covered by the budget Wharton is proposing.

But Wharton said in putting together the budget proposal that is certain to change to some degree once the council begins budget hearings, he didn’t go for one-time sources of revenue to get the city through that year.

“Once this year’s over, the schools will be out of the way. That will free up capital,” Wharton said. “But those are non-traditional. Before I pursued non-traditional means, I wanted to make sure we have extensive deliberations with the council.”

The one-time revenue options that could come into play total about $29 million.

The first is using $9 million the city had made from selling the old Defense Depot property in South Memphis.

“You’re pulling about 10 cents off the request, which would drop it to a 37-cent tax increase. That is if the council continues the present 18 cents for schools,” Wharton said referring to the 18-cent one-time property tax hike the council approved last June but voted not to levy earlier this year.

The other $20 million would come from a $500 million pool of OPEB (Other Post-Employment Benefits) funds the city is required to hold.

“That’s a decision we need to make with the council,” Wharton said of the OPEB option. “That’s a fairly nonconventional way of running the city but we are in some nonconventional times.”

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