VOL. 132 | NO. 89 | Thursday, May 4, 2017
Luttrell Shuns Tax Cut In Proposed $1.2B Budget
By Bill Dries
Shelby County Mayor Mark Luttrell has taken a $1.2 billion consolidated county government budget proposal to the Shelby County Commission that would maintain a stable property tax rate but shift a part of the tax rate to establish a capital projects pay-as-you-go fund.
The budget plan includes no new operating funds for Shelby County Schools as the school system instead seeks $25 million in capital funding from the county a year after the school system campaigned for and got $28 million more in operating funds from the county.
Operating funds going to SCS and the county’s six other suburban public school systems would remain at the current $419.5 million, which is the state required “maintenance of effort” for local funding.
The budget proposal also includes new positions and more programs at the Shelby County Health Department to help reverse a “steady erosion” of the department in recent years, Luttrell said.
Before the Wednesday, May 3, presentation before the commission’s budget committee, Luttrell also said he anticipates a call by some commissioners for a county property tax rate cut once the new certified tax rate is set to take into account the 2017 countywide property reappraisal.
“Fund balance is our safety net,” Luttrell said in laying out his defense of a stable tax rate.
County tax revenue hits its high point in the fiscal year in February, with reserves being used for cash flow from July into the fall and winter. As the tax revenue comes in, it replaces money used from the reserve.
Some commissioners, however, argue that if the county is ultimately collecting more money than it needs, it should be returned to taxpayers.
“Come say that in January and you will find there will not be money in the bank,” Luttrell said in response. “We have a fund balance to cover us when we hit those low points. Right now, we’ve got a healthy fund balance. We will this time next year, but in between now and then we won’t.”
County chief administrative officer Harvey Kennedy said the way to adjust a reserve that is too high is to adjust it “going forward.”
“At the end of November, even with a healthy fund balance, we are just about tapped out,” he said. “It hasn’t been that long ago that we had to do short-term borrowing to make payroll. That kind of short-term borrowing is very costly.”
County leaders are still awaiting word from the state on what the recertified property tax rate will be, taking into account the 2017 countywide property reappraisal. The current county property tax rate of $4.37 will be reduced in the new certified rate to produce the same amount of revenue the current tax rate does, under state law. Property values in the reappraisal rose – by 13 percent for residential property and 20 percent for commercial property – on average countywide.
“It’s a state calculation that we follow pretty much by the book,” said county finance and administration division director Wanda Richards. “We kind of make some estimates to see where it’s going, but we’ll have the specifics of it and everyone can discuss. We know it’s going to be lower.”
A shift of 0.7 percent of property tax revenue out of education and into capital projects goes to fund projects that are mostly related to the school systems, as their capital needs are now greater operating as individual school districts.
“If we had not reduced the tax rate allocation to education, they would get more than the maintenance of effort amount,” Richards said. “And they didn’t ask for more this year.”
Meanwhile, the county’s debt is at approximately $983 million, the first time the debt has been below $1 billion in almost 20 years – peaking at $1.8 billion when county Mayor A C Wharton put in place measures that began paying the debt down.
Kennedy said that may not be the case for very long although the goal is to limit annual capital spending to no more than $75 million a year.
“But quite frankly, we’re sure that isn’t going to happen,” he said. “This year there are already two new schools in the budget for Shelby County Schools. And they are proposing another one for next year and apparently they’ve got a ton of deferred maintenance that they are going to start tackling now. So I think we’re going to have to be realistic and look at the debt funding coming from schools in the future years is going to go up. I don’t think we can stay under a billion for long, but maybe we can.”
The administration, headed by a mayor who ran the County Corrections Center before being elected sheriff and then county mayor, is also seeing less funding from the state for nonviolent felons serving time at the county facility because there are fewer of those felons coming through the system.
“We don’t really have a perfect explanation for why the population has dropped so drastically,” said Kennedy, who worked with Luttrell at the corrections center. “The jail population is still pretty healthy.”
“Look at the state prison system,” Luttrell added. “They are not seeing that drop in population.”
The administration has cut 100 positions in corrections and closed some buildings on the grounds of the prison.