More than a dozen Signal Mountain residents abruptly walked out of the Town Council meeting Monday evening after the council voted 3 to 2 to increase property taxes by 10 percent.
Mayor Bill Lusk, Vice Mayor Susan Robertson and Councilwoman Annette Allen voted to approve the second reading of its $5.7 million budget - which includes a 2 percent pay raise for all town employees. Councilmen Dick Gee and Bill Wallace opposed.
The 15 cent increase means the town's tax now stands at $1.66 per $100 of assessed value.
A handful of residents spoke out against the increase, saying they already are sapped by the bleak economy.
"Why are we entertaining increasing our taxes so we can pay things off ahead of schedule?" asked resident Alden Perry. "You have many people who are on this mountain who are on fixed income. My income is being eroded, as is several of my compatriots."
"The town is facing the same erosion in revenue," Lusk responded.
Gee said after the meeting that he did not think the town's economic situation warranted a tax increase this year.
"It was just a question of how aggressively we were going to fund our town, and we don't have to be this aggressive," he said.
Robertson disagreed, saying that the increase is the "honest" thing to do.
"We are so close to the bare bone," she said. "We've cut and cut, and we really just can't cut anymore."
The town's last property tax increase - besides the citizen-initiated tax increase for the school - was in 2001.
Town Manager Honna Rogers said without a tax increase or cuts to services, Signal Mountain faced a $317,000 deficit because of lagging revenues and higher costs, including insurance, fuel and 911 service fees.
Based on state predictions, she's not expecting the town's revenues to recover to where they were in 2007 until at least 2014.
In discussion before the vote, Wallace maintained his long-standing suggestion that the town take 11 cents of its citizen-elected 30 cent school tax - set aside for paying back the debt for Signal Mountain Middle High School - and redirecting it toward the town's operating fund.
"There are ways to look at [a tax increase]," he said. "You're either raising taxes for the operating fund, or you're raising taxes to accelerate paying on the school bond," Wallace said. "Now is just not the time to raise taxes."
During the budget's first reading, Lusk originally had voted in favor of redirecting school funds. But he later changed his vote during a work session, citing a "moral and ethical" obligation to the stipulations of the referendum, which did not explicitly state that the tax could be used for anything besides paying off school debt.
Robertson also noted that voting to divert money away from paying the school bond would mean that the school tax would be rescinded only 19 cents when the school was paid off.
"It'd be a back-door tax," she said.
Lusk said he'd combed through the budget before the votes and tried to come up with any additional cuts that could prevent a tax increase.
During the meeting he brought up the possibility of using $431,000 set aside to build a satellite fire station for the Windtree and Fox Run subdivisions when they are annexed into Signal Mountain in December 2012.
Rogers and Town Attorney Phil Noblett cautioned against using the funds so hastily.
"I don't think it's a good idea to just take that away without a lot of research and discussion," Rogers said.
Rogers also said using that money now likely would mean a tax increase would be imperative in the next two years.
"So that's another can we'd just be kicking down the road," Robertson said quietly.