Wednesday, January 25, 2012
Confusion on Taxes and a CFO at City Hall
Posted by John Branston on Wed, Jan 25, 2012 at 4:21 PM
In another sign of a city administration that looks disturbingly erratic and half-cocked on finances, the 2011 Memphis property tax bills include a “GF (general fund) one-time assessment” of 18 cents per $100 of assessed valuation. That goes with the “general fund” tax rate of $2.2917 and the debt service rate of 71 cents and the CIP fund rate of .0031 (translation: a couple bucks or so on your bill). Total: $3.1889.
The bottom of the bill says “Any subsequent special school tax approved by the Memphis City Council will be mailed separately,” which suggests there’s more to come.
The plain, if unpopular, fact is that Memphis owes MCS more money until 2013. As U.S. District Judge Samuel H. Mays wrote in his ruling last August on the schools merger, “The city of Memphis has the obligation during the transition process to maintain its funding of the Memphis City Schools.”
I have discussed this “one-time assessment” with fellow journalists, city council members, former journalists, bloggers, neighbors, city council staff members, mayoral spokespersons, and employees in the city treasurer’s office. Saying there is “widespread misunderstanding and disagreement and confusion” is putting it mildly. In fact, the only way I could prove to some people that the city actually did levy a “one-time assessment” was to show them a copy of my own tax bill.
“You are not alone in your confusion,” city of Memphis chief administrative officer George Little told me Wednesday. “We will be discussing this further with the council" at a retreat on February 11th.
On a related subject, Little said Mayor A C Wharton is holding off on his plans to hire a chief financial officer, as he announced in his State of the City speech Monday. That person would have worked with Little and Housing and Community Development Director (and MHA director) Robert Lipscomb. The proposed triumvirate is now a dynamic duo, with no new hire and with Roland McElrath still aboard as director of the Division of Finance. It seems the administration had not cleared this brainstorm with the city council.
“That notion has not been totally cast aside but it is clear now we have more work to do with the council on reorganization of divisions,” Little said. The administration still wants to hire another person or consultants to take a long view and “look at indebtedness and in a worst-case scenario of a total meltdown, what is our capacity to make good on our obligations.”
The “one-time assessment” was a product of a hectic city council meeting last summer as the deadline for approving a budget loomed and MCS demanded its court-ordered $57 million back payment of city funding. On the 2011 tax bills, it replaces a nearly identical amount in previous years that was labeled differently. The money probably goes to Memphis City Schools either way, but the city is betting on a favorable outcome of a seemingly endless lawsuit over who owes what to whom.
Bottom line for taxpayers: Don’t bet your life on a one-time assessment and a tax rate decrease from $3.19 to $3.01. Every tax bill is essentially a one-time assessment subject to change each year.
City finances are what you might call challenging. After several commercials about how wonderful Memphis is, Wharton said in the State of the City speech that with the next reappraisal, total property assessments will be down for the first time in modern history, while bond payments “face a major increase” and “runaway pension costs are a destabilizing force in city finances.”
If assessments fall, the only way to net the same amount of tax revenue is to raise the property tax rate or impose new fees or “special-use taxes.” On the expense side, Little said “clearly there will be some discussions about levels of service.” Most city employees have taken a 4.6 percent pay cut, which was originally cast as elimination of paid holidays.
Memphians pay the highest property taxes in Tennessee. The suburbs want no part of this action. If you own property in Memphis and do not carefully examine your tax bills, beware.
Meanwhile, here are some updates on two developments that did not make it into the mayor’s speech.
The “Triangle Noir” urban renewal project south of FedEx Forum is going to be the subject of a “charette” at Bridges on Monday. No word on private dollars in this deal. Expect assurances from Wharton and Lipscomb that this slice of urban blight can be transformed with the help of federal dollars and Tourism Development Zone funds (from rebates of state sales tax) without using “city tax dollars,” just like the Bass Pro Pyramid.
And Overton Square has a possible new developer for the old French Quarter Inn hotel property at Cooper and Madison. The developer, who was not named, will meet with citizens on February 1st at Memphis Heritage at 6 p,m.
Comments (7)
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The mortgage companies are going to love this. Instead of calculating your escrow account once a year, folks in Memphis will have theirs re-calculated every once in awhile.
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I haven't seen Roland McElrath quoted on any of this. If he can't explain it, I don't think it can be explained. I think there was a foulup somewhere and they are all dancing around about it. It seems clear that barring some calamity, they are not going to amend the tax rate ordinance and send out any kind of supplemental tax bills. I can't remember supplemental tax bills being sent out any time in the past 50 years.
From an earlier Flyer article re the mayor's state of the city address:
"On the sober side, there was the announcement that with the next property reappraisal, Memphis' total assessments will decline for the first time in modern history at the same time the city faces a major increase in bond payments."
Probably not a calamity, but it sounds like higher tax rates are in the offing just for the city to stay even.
Memphis may have property taxes that are the highest in the state but many, many states have taxes that are higher than what we pay. I work with taxes on properties all over the US. Many states and counties have separate school taxes, utility taxes, fire taxes, you name it.
Mortgage companies do this all the time- because there are other states and counties that have special assessments from time to time. Some counties in Illinois will even hold onto an assessment for a long time to be able to go back and re evaluate it- even when their taxes are already paid over a year in arrears to begin with.
The University of Memphis did a study three or four years ago that shows combined taxes are higher in DeSoto County than they are in Memphis. A major factor is that there is a state income tax plus a significant personal property tax on motor vehicles.
You are 100% correct about the overall tax burden being higher in the DC cities than it is in Memphis.
When looking at the special $0.18 tax assessment remember to look at your 2010 COM tax bill. If you have noticed the 2010 tax bill was less than the 2011 bill because of a slight decrease in the tax rate from 2010 to 2011. The special assessment is intended to pay the 57 million from 2008 that the city never paid MCS. The $3.1889 tax rate includes the 2011 funding for MCS. The City actually never sent out any special bill to receive the $0.18 cents this tax year. I guess they will reserve the right to collect that money if a judge rules that they must pay the 57 mill from 2008. When the transition is complete in 2013 I would hope that the City leadership would reduce the city tax rate dollar for dollar with the amount they are saving by no longer paying MCS. To not do this would be very shady considering the fact that county taxes will most assuredly go up to pay the schools the money the city will no longer provide.
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