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VOL. 128 | NO. 138 | Wednesday, July 17, 2013

Commission Begins Work on New Tax Rate

By Bill Dries

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Shelby County Commissioners have several important questions to consider Wednesday, July 17, in committee sessions, all of them having to do with that most volatile of political questions – taxes.

The Shelby County Commission has lots of important questions to answer in committee meetings as a new property tax rate is still needed. 

(Daily News File/Lance Murphey)

More than two weeks into the new fiscal year, Shelby County government has no new property tax rate. The commission last week on third and final reading voted down the $4.38 tax rate proposed by Shelby County Mayor Mark Luttrell.

Until a tax rate of some kind is approved, commission Chairman Mike Ritz is proposing a hiring freeze and a freeze of spending on county travel, dues and memberships, and grants to nonprofits.

The 15 line items account for $1.4 million in spending.

Meanwhile, Commissioner Terry Roland has a resolution in committee to cut the general fund budget by $57 million.

It was a motion Roland tried to make at the July 8 commission meeting but he didn’t have the specifics in writing.

Roland’s goal in the motion was to take the budget down to a corresponding county property tax rate of $4.02 in Memphis and $4.06 in the county outside the city. The tax rate for the county outside Memphis is 4 cents higher to pay off rural school bonds used to finance the construction of Arlington High School.

Meanwhile, Commissioner Steve Basar, part of the seven-vote majority last week that voted down the $4.38 rate, moved later to take the tax rate to $4.32. That is the rate at the “certified” amount it is estimated it would take to produce the same amount of revenue for county government as the $4.02 rate, taking into account property value lost in the 2013 property reappraisal.

The 6-cent property tax hike beyond that would produce about $9 million in revenue, which would be roughly half of the $20 million in new revenue the county would use to fund the consolidated school system.

Without the tax hike or a reallocation of other funding within the county budget to education, the school system would have to make further budget cuts as the school year is about three weeks from starting or dip further into its reserve funds. The countywide school board already voted to use $10 million from its reserves to fund the gap left between revenues and expenses for the system with the $4.38 rate.

Basar moved for reconsideration of the tax rate resolution vote after $4.38 failed. His move for the certified rate was voted down. Basar then moved to defer further reconsideration of the tax rate until the commission’s July 22 meeting. That kept the tax rate resolution alive but with a blank where the tax rate dollar figure goes.

“Where are you trimming it from — from general fund, education or debt service?”

–David Lenoir
Shelby County trustee

The budget committee session is likely to be an indication of what is to come next week.

The commission also hears from Shelby County Trustee David Lenoir Wednesday with a look at the first fourth quarter revenue figures before he closes the books on the fiscal year that ended June 30.

Those numbers will be important in determining if there is any surplus.

The art of the budget for local governments is to hit several fiscal targets – revenues, expenses and a bottom line – that are 12 months away. Because of the distance, the bull’s-eye can be pretty big depending on the variables.

For local governments, the biggest variables tend to be revenue collections on the state level especially for money that flows almost directly to local governments. “Almost” is an acknowledgement of the importance of timing in the flow of revenue during the year. And sometimes state funding formulas change.

Lenoir was preparing to send out property tax notices or bills to county property owners at about this time a year ago and his office took in $32 million, he estimates during the first three months of that fiscal year. That money flowed into the coffers of county government to begin funding line items and decisions made during the budget deliberations of the spring of 2012.

Lenoir is waiting on not only the answer to the question of what the property tax rate will be, but he also needs to know how the tax rate is distributed. That is a question Ritz was already asking last week as Roland and Basar proposed their alternative tax rates.

“Where are you trimming it from – from general fund, education or debt service?” Lenoir asked last week as he framed the more specific issue beyond the tax rate. “That’s the thing in terms of trying to figure out who takes the hit. We don’t really know yet which of those buckets is going to take the hit.”

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