CITY BEAT 

Nobody likes the property tax hike or the alternatives.

NO WAY OUT? This week’s property tax hike is too much, and property owners will flee to neighboring counties. Or it’s not enough, and services will suffer. Nobody’s happy. For starters, the rhetoric is overheated. The sky isn’t falling. The proposed 25-cent hike in the tax rate amounts to a few Grizzlies tickets or an evening at the casinos to most homeowners. In May, Fitch Ratings assigned a AA rating to Shelby County’s $153 million general obligation debt and affirmed its AA rating on $1.22 billion in outstanding bonds. Fitch Ratings spokesman Mitch Burkhard said AA means the county has very high credit quality and strong capacity for payment of debt. "Shelby County’s AA general obligation bond rating is based on a deep, diverse, expanding economy, manageable debt burden, and sound historical finances,” says the May report. “Concerns about fiscal stability, which abated in the last few years, have been renewed. These concerns are somewhat offset by the county’s past track record of raising revenues and controlling expenditures to meet challenges of similar magnitude, but maintenance of the county’s strong long-term rating will rely on the resumption of stable financial operations.” The trend is bad. Memphis property taxes are 60 percent higher than Nashville’s. With the proposed increase, homeowners will pay a combined city and county property tax rate of $7.27. The rate in Nashville is $4.58. Property taxes on a $200,000 Nashville home: $2,290. A $200,000 Memphis home: $3,635. Comparisons between Memphis and Nashville are old hat, but lately the Memphis Regional Chamber of Commerce, not exactly a bunch of naysayers, has noted a couple of unflattering ones. In 1980, Memphis was the largest metropolitan area in Tennessee, but now Nashville is. The Chamber says Nashville has a better image to outsiders and gets more new residents than Memphis, where growth is mostly due to births. The tax base is shrinking in Memphis and growing in Nashville. Memphis has more people on TennCare, more people in jail, more failing schools. Nashville is catching the high-profile companies. In June, Nissan North America announced that it is moving production of its Pathfinder SUVs from Japan to just outside of Nashville, bringing an estimated 1,500 new permanent jobs to the area. Shelby County has done the easy things, like refinancing its long-term debt wherever it can to take advantage of low interest rates. “The county’s overall cost of borrowing is just under five percent,” says Jim Huntzicker, director of finance and administration. “For the most part, older higher cost bond issues have been refunded and cannot be refunded again.” The county plans to refinance two issues that carry an interest rate over five percent, saving about one percent on $150 million and less than a penny on the tax rate. The administration says a 16.5 percent cut from every division of county government would make a tax increase unnecessary. The commission scuttled that. Commissioners John Willingham and Diedre Malone suggest a payroll tax, but the last time it was proposed (by the City Council) FedEx launched an all-out assault against it. At least four suggestions have been made to cash in on unusual public assets.
  • The city could sell Memphis Light Gas & Water, raising an estimated $800 million and triggering a cut in city property taxes. Mayor Herenton proposed this in 1999 and was roundly criticized, but if city taxes went down, the city could take over some county expenses, just as it geographically takes over parts of the county by annexation.
  • A Pyramid casino, taxed at the 12 percent rate that Mississippi and Tunica tax their casinos, would raise at least $25 million a year. But the state legislature and possibly the Tennessee Supreme Court would have to take favorable action first. The Detroit News reports that Detroit gets $170 million, or 10 percent of its general fund budget, from taxes and fees on three casinos opened since 1999 to compete with one in Canada.
  • Selling or leasing 10 percent of Shelby Farms (450 acres) could result in a one-time windfall or annual lease payments of $1 million or more, say suburban developers. No other urban county has such a big piece of undeveloped land at its center.
  • The county has one more “asset” it could put in play: the jail. Corrections Corporation of America (CCA) is the largest private prison company in America. Its headquarters are in Nashville. Its chief executive, John Ferguson, is a former Shelby County resident and former Tennessee commissioner of finance under Gov. Don Sundquist. CCA operates several municipal correctional facilities, including the Metro Detention Facility in Nashville and the jail in Tulsa, Okla., which used to be run by the sheriff. With 1,400 inmates, the Tulsa jail is the largest private city jail in the country. Tulsa pays CCA $45.81 per inmate per day. The Shelby County Sheriff’s Office budget, which includes law enforcement as well as the jail, is $134 million. All of these ideas are dismissed as wacky or politically unrealistic or both. But the reality is, other cities are doing them while Shelby County continues to raise property taxes on a shrinking tax base.
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