Berke: Don't cut city's share of sales tax revenues

Chattanooga Mayor Andy Berke speaks to members of the Chattanooga Times Free Press editorial board, May 20, 2015, in Chattanooga, Tenn.
Chattanooga Mayor Andy Berke speaks to members of the Chattanooga Times Free Press editorial board, May 20, 2015, in Chattanooga, Tenn.

Chattanooga Mayor Andy Berke doesn't want state lawmakers messing around with the city's share of state sales tax revenues.

In a luncheon meeting Tuesday with four members of the Hamilton County delegation to the state General Assembly, Berke said he doesn't like Hamilton County Mayor Jim Coppinger's plan to change the way a portion of state sales tax revenues is returned to local governments. Currently, some of the money raised from the sales tax goes back to all of the cities in the state, based on their population. Coppinger has proposed changing that to include people who live outside incorporated areas, as well, by counting them as though they were in a city and giving that share of the sales tax revenues to the county to spend.

That could cost the city as much as $5.4 million, Berke said, in an interview after the luncheon. He warned that smaller towns, which don't have much budget flexibility, could be crippled by the possible budget shortfalls.

Berke said most of the sales tax in the metro area is collected in its largest cities, and those cities have big infrastructure needs - roads, bridges, sewer systems, police and fire departments, e.g. - that support the businesses that generate the tax revenues

The mayor also asked lawmakers to pass legislation giving the city permission to waive water quality fees - formerly known as stormwater fees - for seniors who already qualify for an exemption from property taxes. The water quality fee covers the costs to manage the city program responsible for reducing stormwater runoff pollutants and maintain the stormwater sewer system.

City Attorney Wade Hinton asked the lawmakers to consider reviewing how water utilities are allowed to raise their rates. The state changed the system in 2013 to allow water utilities to pass the actual costs in their operations on to consumers without having to get approval from a regulatory agency. But that has resulted in substantial rate increases, Hinton said, and the city has no legal authority to review whether or not they are justified.

House Majority Leader Rep. Gerald McCormick, R-Hixson, was noncommittal about the city's request, noting legislators adopted the new regulatory plan to free utilities from drawn-out rate hike proceedings where, in his words, "the only people who came out ahead were the lawyers."

There were few questions from lawmakers.

Sen. Todd Gardenhire, R-Chattanooga, asked whether the city's sewer system downtown was going to be sufficient to handle future growth. Berke said the city's sewer system needs upgrades everywhere, and not just downtown. Public Works Director Lee Norris said once the city completes a study mandated by the U.S. Environmental Protection Agency, he will have a better idea how much money will be involved.

"I anticipate when that is finished, we will have additional work to do to meet EPA requirements in the downtown area," Norris said.

Berke touted new residences planned for downtown. He emphasized the city is using its tax incentives to require developers to include a mix of affordable housing in new apartments downtown, generally 20 percent of the total number of units. "Our downtown is going to add thousands of residents over the next few years," he said, "and they will change the city. They are people who want a vibrant, energetic place to live."

Rep. JoAnne Favors, D-Chattanooga, asked what the city was doing to prevent gentrification, where wealthier residents move into a previously poor neighborhood, converting rental homes to residences and driving up taxes to the point previous residents can no longer afford to live there. She noted the federal Housing and Urban Development agency allows cities to require more than 20 percent be considered "affordable." Although several city department heads took a crack at answering, Favors didn't get a clear answer.

Police Chief Fred Fletcher responded to a question from Gardenhire about whether methamphetamine is a major drug problem for the city. It is not, Fletcher responded, pointing to the illegal use of prescription drugs and marijuana sales as his two biggest drug problems.

Berke started the luncheon by listing what he saw as improvements the city has made in the past year.

His top item was his administration's success in negotiating changes to the city's fire and police pension plans, a change that was upheld in court in November.

"That was a cost that was continuing to escalate in a large way," Berke said.

He also noted the local unemployment rate has come down from 7.8 percent in March 2013, when he was sworn in as mayor, to 5.6 percent in October 2015.

Berke's final plea was for lawmakers to give the city as much local control as possible.

"Our needs are different from those of Memphis and from those of the rural areas around us," he said. "We would appreciate any deference you can give us to control what happens in Chattanooga."

Interviewed after the luncheon, Gardenhire said he believed some form of Coppinger's sales tax legislation would pass the General Assembly, but would probably guarantee cities their current level of revenues and add a share of any increased revenues to county coffers based on their unincorporated population.

Gardenhire also indicated that Gov. Bill Haslam may be getting some traction on his push to raise the state's gasoline tax to pay for road and bridge improvements. At least 44 bridges need replacement or repair in his district alone, Gardenhire said, and he estimated that it would take $500 million to $750 million to pay for all of the needed road and bridge work in the Chattanooga metro area. He conceded that many lawmakers had taken a "no tax increase" pledge, but indicated that he felt this might be the proper time to raise the gasoline tax given that gas prices are at historic lows.

Gardenhire also seemed open to the idea of an increase in the gasoline tax, citing a huge need to repair and expand the Chattanooga metro area's bridges and roads. Gardenhire conceded that a pledge many lawmakers signed never to raise taxes was an obstacle. He said he was hearing private indications that some legislators recognized the need to increase funding for highway repairs and saw the historic low prices for gasoline as an opportunity to do so.

Contact staff writer Steve Johnson at sjohnson@timesfreepress.com, 423-757-6673, on Twitter @stevejohnsonTFP or follow him on Facebook, facebook.com/noogahealth. Contact Terri Likens at tlikens@timesfreepress.com or 423-757-6597.

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