County Mayor Jim Coppinger and the nine members of the County Commission keep suggesting that Chattanooga’s city government is somehow shirking its financial obligations to a range of civic agencies because the city has decided to let the sales tax agreement lapse when it expires on May 23. The way county officials tell it, they will have to let funding for these agencies lapse because the city is taking away their funding source.
In truth, city residents and businesses have been paying twice to support the civic agencies involved — or about 80 percent of the bill overall. They’ve done so in a lot of other city-county cost-sharing arrangements as well. They’ve been paying once through their donated sales tax revenue, and again through their county property taxes.
City still pays fair share
Even with the lapse of the sales tax agreement, they will still be paying the lion’s share — 58 percent — of any support that is ultimately continued for these agencies through the common county property tax that every other county resident and business pays.
They will also use more than half of the $10.5 million from the expiring sales tax agreement to continue fully funding the Regional Planning Agency and most of the city-county library’s budget. County government has pretended to pay a portion of these costs by handing back to them some $5 million from the city’s contributed sales tax fund.
The city’s new arrangement is more than fair. City residents comprise fully half of the county’s population, and businesses in the city generate approximately 80 percent of the county’s commercial property tax base. Taken together, the city’s taxpayers will still 58 percent of the county’s property tax receipts.
An outdated formula
So it’s past time to let the sales tax agreement expire. It was established in 1966 on the notion that because the city had the bulk of the county’s shopping venues, it was fair for the city to share revenue with county government from its local-option 1 cent sales tax. In fact, the city has long needed that revenue to fund and maintain the higher level of infrastructure that is required to attract and keep large businesses — i.e., 24/7 fire service, more intensive policing, large sewer mains, wider and busier roads, garbage collection, public code enforcement.
The county’s double dealing
Those costs are not shared by county government, nor does the county provide such services in the unincorporated areas of the county. Without a county charter or home rule, it can’t establish and enforce municipal codes, or even hang a traffic light. The county does, however, unfairly use its countywide property tax revenues to support certain key services that it provides only in the unincorporated areas of the county: i.e., road building and maintenance, sheriff’s patrol, and volunteer fire department’s infrastructure.
County government also uses countywide tax revenue to issue bonds for the county’s Water and Wastewater Treatment Authority for sewers only in the unincorporated areas of the county. (County taxpayers in municipalities that use the WWTA have to pay separately by contract.)
Given these fiscal inequities, the suggestion that city government has unjustly decided not to fund its fair share of vital civic agencies is nothing more than political weaseling by county officials to shift blame.
That’s wrong, and politically pathetic. If county officials were truly responsible to their office, they would fully fund the countywide costs of the county health department, general civic agencies and the urban infrastructure that is increasingly needed to meet the county’s pending growth demands. County government also would raise taxes this year — for the first time since 2007 — and initiate, at last, a plan to place a referendum for a county charter government or home rule on the 2012 ballot.
In fact, county officials cannot keep shirking the fiscal challenges that lie before them for the school budget and their rapidly growing urban responsibilities. They must face the fact that tax revenue growth still lags behind the public infrastructure costs of growth, especially given the tax abatements now commonly given to lure business development. Those incentive costs will deprive county government and county schools for years of the revenue needed to service the growth they induce for attendant residential and commercial growth.
Incentives shift costs
County and state officials are fond of shrugging off the cost of these deep, decades-long tax abatements by saying that, well, it will bring more jobs, and more workers and will pay more taxes. But that formula only works if those left to pay the taxes also pay the higher upfront costs of infrastructure that the new businesses dictate.
County government has raised the property tax rate only twice since 1999 — once in 2005, by 26 cents, for schools; and again in 2007, by another 26 cents, most of which went for schools. Those modest increases badly lag behind the real costs of growth and price inflation in that period.
The time-proven schedule for periodic tax increases for local city and county governments used to be four years, beginning the year after an election. That only ended at the county because Commissioner Fred Skillern led a bare majority faction of commissioners who repeatedly withheld a tax increase for county schools in the past decade in a mean yet ultimately successful attempt to force former Superintendent Jesse Register from his job for purely parochial reasons.
A budget chokehold
The myriad bad results of that budget chokehold now include a shriveled general budget and a $14 million school budget deficit. A large chunk of the latter owes to the state’s open-ended deferral of the promised second $12 million increase under the revised BEP parity plan for state school funding. The second bump was deferred after the 2008 financial implosion and the drastic fall-off in state tax revenue. Yet it still stands as a challenge to the County Commission’s own long neglect of the county school system.
With these fiscal challenges, and pending growth that will come without the tax revenue that has been obliterated by tax abatement incentives, county officials must find the courage to devise a fiscal and charter plan that adequately serves public needs. They can’t blame their political cowardice on the city for ending the county’s long double-taxation of city residents.