published Wednesday, April 6th, 2011

A time to negotiate

The impasse between Chattanooga and Hamilton County governments over whether to negotiate a replacement for the expiring sales tax agreement apparently stems from legitimate concern by city officials over the long-ignored issue of local tax equity. But that does not justify the city’s refusal to participate in negotiations toward a new, more equitable agreement.

At stake is funding for more than two dozen vital agencies that provide basic or crucial safety net services countywide. Their services cannot be left to wither without causing serious damage to essential services. The earmarked penny on the countywide sales tax that is at the core of the impasse is an appropriate source of revenue to help sustain those services.

County Mayor Jim Coppinger has been stumping for new negotiations, but he has mainly received a cold shoulder from Chattanooga Mayor Ron Littlefield, who says the city will assume control of the earmarked sales tax revenue and apportion it to the agencies. The flaw in this is that the county has supplemented the agencies’ funding in recent years as the sales tax revenue has become insufficient to meet their budgets.

Littlefield’s response, however, may well be because of Coppinger’s repeated assertions that even if the county loses the $10 million-plus proceeds provided by the current sales-tax agreement, county officials won’t deign to even consider the possibility of a countywide property tax increase to help offset any of that loss. Nor will they consider an infusion from the county’s conspicuously large $85 million fund balance.

If the county’s pursuit of negotiations on tax revenue is essentially so one-sided, city officials could ask, why bother with one-way negotiations?

In truth, both sides should be ready and able to negotiate without conditions. They also ought to invite members of the county’s other nine municipalities. Some of these towns have never stepped up to their responsibility for maintaining these countywide services, which include, among others, Orange Grove, Family & Childrens Services, county Health Department, Erlanger’s indigent care, the countywide emergency service, Joe Johnson Mental Health Center, and the AIM, Fortwood and Signal Centers. Not one of the two dozen agencies and departments that receive partial funding from the expiring sales tax agreement should have their funding stripped or reduced because city and county leaders can’t reach a new agreement.

City officials, having suffered the heat of adopting a tax increase last year, do have sound reasons to resent the local tax inequity that is inherently and frequently borne exclusively by Chattanooga residential and commercial taxpayers when the city picks up half the share of many joint city-county expenses.

In such shared costs, city residents and businesses pay all of the city’s share. And since city residents also constitute half of the county’s population, they also provide about half of the county’s residential property tax revenue. And since the city’s commercial base constitutes the lion’s share of the countywide business base, businesses in the city provide the bulk of the county’s commercial property tax revenue, as well.

So at a minimum, city residents pay 75 percent of a city-county shared project funded by residential taxpayers, and the city’s commercial tax base pays an even higher percentage from the countywide commercial property tax revenue. So, for example, Chattanooga residential and commercial taxpayers probably paid well in excess of 80 percent of the $46 million funding in the shared (supposedly 50-50) “city-county” funding for the $40 million highway from I-75 to the VW plant and the $6 million emergency services center there),

Another side of the inequity is that the city must levy higher taxes than those in the unincorporated areas of the county and in the nine other smaller municipalities in order to provide the higher level of infrastructure costs (i.e., 24/7 full-time fire department, sewer mains, more intensive policing, waste removal, road and traffic signal services) that are required to maintain the commercial base that provides most of the jobs for the residents of more lightly taxed suburban towns, who, conversely, eschew residence in the city because of its necessarily higher taxes.

The resistance of county leaders to affirmatively address the tax inequities, and the consequent need to consolidate public services, must be galling to city leaders. Yet a committed effort at negotiations is the only way to make progress on tax equity, and to meet the needs of civic agencies that rely heavily on public funding to sustain services that the community cannot afford to lose.

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dfclapp said...

According to State law, the County alone has the right to collect a local sales tax up to 2.75%. Should any city desire to collect a portion for its own use, it may not exceed whatever portion of that 2.75% the County leaves untaxed.

Local agreements between the cities and Hamilton County already ceded much of this County-wide sales tax to organizations that largely benefit the cities. Just as the County would suffer without the cities, the cities would die if they starved the surrounding areas or if the County kept all its tax revenue for unicorporated areas. If you look at who benefited most from joint agencies, the city of Chattanooga got the vast majority of it.

April 6, 2011 at 5:16 a.m.
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