Shelby County’s Tax-Rate Impasse 

First, the good news. (Long pause). Yeah, right. Now, for the bad news: This is the budget season for Memphis city government and Shelby County government, and, with the clock ticking (the 2014-15 fiscal year begins, in theory, on

July 1st), both local governments are clearly having trouble getting their books in order for what comes next.

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In county government's case, there are several end-of-cycle issues that didn't get resolved at the County Commission's regular Monday meeting and have been slotted for resolution in a special called meeting for June 26th. The most important of these is the matter of a county tax rate, and the holdup there has to do — wouldn't you know it? — with fallout from the long-running city vs. county showdown on school reorganization.

The chief difference between a tax-rate resolution offered by Republican Commissioner Heidi Shafer and one suggested by Democrat Steve Mulroy is whether an additional 4 cents on suburban residents' tax obligation — accruing to the building of a new Arlington High School 10 years ago — should be removed, as Shafer and her mainly GOP and suburban allies want, with the tax burden being equalized for city and county residents alike. Or, as Mulroy and his Democratic allies insist, the differential tax rates should be continued.

The Shafer argument is essentially that school reorganization — the complicated segue from merger to unity to post-merger and municipal school independence — has changed the relevant school jurisdictions so as to make the additional 4-cent tax burden unfair and even, as Shafer supporter Terry Roland argued, "illegal."

County finance officer Mike Swift shares the concern, to the point of recommending that the additional tax be substituted for by using a portion of the local-option sales tax collected in the suburban areas in order to pay off the remaining $11.68 million left on the rural-bond issue that built the Arlington school.

At Monday's commission meeting, Mulroy and Commissioner Mike Ritz, a Germantown resident and a Republican, but an established dissenter from the GOP position on schools, argued that disallowing the suburban tax differential cheats the original deal reached in 2003, whereby Memphis-based commissioners agreed to waive the Memphis City Schools share of a 3:1 split in the city's favor on capital construction funding so as to allow county residents alone to build the Arlington school with rural school bonds.

Moreover, said Mulroy and Ritz, the local-option solution would divert funds that could be used for general county purposes.

It is a technical controversy, to be sure, but one with real consequences to taxpayers and one that allows both sides to plead the issue of fairness.

Neither side could get a majority on Monday, and, if there is no agreement on June 26th, there is only one opportunity left, at the Commission's regular meeting on July 7th, for a tax rate to be established in a timely manner. County attorney Marcy Ingram has warned of fiscal consequences to established county services if that doesn't happen.

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