VOL. 128 | NO. 45 | Wednesday, March 6, 2013
Lower Property Values Sink Revenues
By Bill Dries
The first formal notices of 2013 Shelby County property values in the once-every-four-years reappraisal for taxation purposes were mailed Monday, March 4, to owners of commercial and industrial cost properties as well as homeowners in Hickory Hill, Whitehaven and parts of Southwest Memphis.
Those at the Shelby County Assessor of Property’s office, which conducted the reappraisal and sent the notices, spent Monday making final preparations for addressing taxpayers’ concerns, including staffing an Assessor’s Answer Center at 222-7001.
“I don’t expect it to be heavy by any means,” said Patrick Lafferty, chief administrative officer of the assessor’s office of the call load. “Those areas typically are not high call volume areas. When we move east into the suburbs that’s when we expect some higher activity. That’s what we are preparing for.”
All of the notices from the assessor’s office should be mailed by April 20.
Reappraisal notices to condominium owners and those in Frayser, Raleigh, Berclair, Millington, parts of East Memphis and the unincorporated parts of Northwest Shelby County are next up on March 11.
Notices on commercial and industrial income properties, as well as duplexes and triplexes are mailed March 18 along with notices to homeowners in Germantown, Collierville and Southwind.
Homeowners in Arlington, Lakeland, Bartlett and Cordova follow on March 25 along with Downtown and Midtown residential property owners.
Notices to homeowners in most of East Memphis are mailed on April 1.
Reappraisal notices on exempt properties, acreage tracts, mobile homes and greenbelt properties, as well as multiples and personal property, go out last on April 19.
The reaction to the bottom line of the reappraisal is already well under way.
Local elected leaders who will set recertified property tax rates and property tax rates beyond that have been bracing for months for a reappraisal unlike any in the memory of those holding local office.
The reappraisal reflects the onset of the recession that began in 2008 just as notices from the last reappraisal in 2008 reflected the real estate bubble at its height.
Shelby County Assessor Cheyenne Johnson confirmed last month at a budget retreat for Shelby County Commissioners that current local property tax rates will produce less revenue in 2013 for local governments than they did before.
The current county property tax rate of $4.02 cents will produce 4.63 percent less revenue based on the property values, according to Johnson’s estimate.
It is the first time in the memory of any elected official now holding office that a reappraisal has not either produced roughly the same amount of revenue or shown some growth in revenue.
The reaction from commissioners and Shelby County Mayor Mark Luttrell to the percentage included some relief. They expected the percentage of the unprecedented drop would be at least 5 percent.
The recertified tax rate to produce the same amount of revenue the county currently gets with the $4.02 property tax rate will have to make up an estimated $52.8 million in revenue lost with the decline in property values, including an amount to cover successful appeals of property reappraisals.
Doing the math for Shelby County Commission Chairman Mike Ritz involves more than calculations in which every penny on the tax rate raises $1.6 million. Ritz is also counting votes for a tax hike to make up not only the revenue lost in the reappraisal but an increase in funding for the consolidated schools district and additional funding required for Memphis-Shelby County Juvenile Court via a settlement with the U.S. Department of Justice on due process issues at the court.
Ritz counts seven – perhaps eight – votes on the commission at this point to raise the county property tax rate by 40 cents. The increase is a 9.99 percent property tax hike. Any property tax hike that is 10 percent of the current rate or higher requires a nine-vote, two-thirds majority and Ritz as well as others on the commission say there are not nine votes for that.
A 40-cent county property tax hike would produce $64 million in new revenue. The $52.8 million in lost revenue from the reappraisal is the bulk of that amount. By Ritz’s numbers, the rest would be $4.2 million to replace Memphis Police officers in what are now Memphis schools once the schools consolidation begins Aug. 5. There is $2 million in new funding for Juvenile Court.
That leaves only $5 million in new funding for the consolidated school system.
There are some variables in the Ritz estimates. Memphis Mayor A C Wharton Jr. has said the city of Memphis may keep Memphis Police as resource officers in Memphis schools.
The Juvenile Court funding numbers are still considered “soft.”
And negotiations are still under way with the state of Tennessee on the reappraisal appeals allowances.