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VOL. 129 | NO. 103 | Wednesday, May 28, 2014

Commission Prepares Final Budget Moves

By Bill Dries

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When Shelby County Commissioners make the last adjustments to the county budget in committee sessions Wednesday, May 28, they will likely increase the 2.5 percent pay raise county Mayor Mark Luttrell proposed for county employees to 3 percent.


And they are also expected to debate Luttrell’s plan to do away with the four extra cents on the property tax rate paid by county residents outside the city of Memphis.

Final votes on the budget season items come Monday, June 2, when the full commission meets.

County Chief Administrative Officer Harvey Kennedy said last week that the administration heard “loud and clear” from commissioners as well as countywide elected leaders who are outside the administration that they wanted to find a way to up the proposed pay raise to a full 3 percent.

And Kennedy said the administration will go along with that and find the additional funding without affecting the administration’s plan to shave a penny off the county’s current $4.38 tax rate.


Meanwhile, County Commissioner Mike Ritz plans to propose that the county keep the 4 cents on the tax rate outside Memphis in place and reduce the overall county tax rate by 2 cents.


And Commissioner Steve Mulroy would use the 4 cents to expand prekindergarten programs.

Luttrell’s plan is to drop the 4 cents extra on the property tax rate outside Memphis that was used to finance construction of Arlington High School and pay off the remaining debt with local option sales tax revenue from the unincorporated county.

The rural school bonds that finance the debt on the construction of Arlington High School were used to avoid the county having to finance a larger dollar amount in order to provide capital funding to the two public school systems in Shelby County at the time based on average daily attendance of each.

County Finance Director Mike Swift said the administration made the proposal after talking with county bond counsel and the Tennessee Comptroller’s office starting last year.

Swift said the Tennessee Attorney General’s office “strongly recommended that we eliminate this tax in some manner, either by paying off the debt or by finding another revenue source.”

The recommendation, according to Swift, was because of the schools demerger and the formation of six suburban school systems, including one in Arlington that will include Arlington High School.

“They felt strongly that the tax would then be an unfair tax with the school being located in one of the municipalities,” Swift said, mentioning the “risk” of the county being sued. “They strongly recommended that we eliminate the tax if at all possible.”

Ritz doesn’t agree.

“I don’t see anything different except the fact that the municipalities are complaining about the tax,” he said. “They never complained about it for years and years and years. … I don’t see this as an unfair tax. In fact, I think it’s the other way around.”

“It’s not fair now,” countered Commissioner Terry Roland. “Regardless of what you think, state law says you can’t have two tax rates in one county. … This is common sense. We will be in court.”

But Mulroy questioned Swift and county attorney Marcy Ingram closely on that point and the specific concerns of state officials.

“They felt that it was unfair and that we have a tax, the sales tax on the unincorporated area, that we can use to pay this debt,” Swift said of the attorney general’s office. “They basically said the law does not address when you have a (schools) consolidation or deconsolidation in this case. … Therefore, there is not specific guidance in the law.”

Mulroy, a professor at the University of Memphis Cecil C. Humphreys School of Law, however, noted that Swift and Ingram both said there is no state law that bans two different property tax rates.

“There’s no one in any position of authority who has at any time ever opined that we are legally required to change what we are doing now,” Mulroy added.

Mulroy said he favored keeping the 4 cents in place and use the revenue from it to expand pre-kindergarten programs countywide, using sales tax revenue to pay the rural school bonds on Arlington High. He also intends to introduce Wednesday a budget amendment to that effect.

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