Beyond a sales-tax fix

Beyond a sales-tax fix

April 14th, 2011 in Opinion Times

The Chattanooga City Council's solid 9-0 vote Tuesday to let the city-county sales tax agreement expire sensibly ends what has long been a virtual mockery of local tax equity for city residents masquerading as a $10.6 million fund for fair burden sharing.

New funding agreements will have to be put in place by the county government for some agencies. But that should be no problem given the county's current tax surpluses.

The city proposes to continue providing sole funding for the Regional Planning Agency's $2 million budget and virtually all of the city-county library's $5.2 million budget.

The county government's new funding obligation would rise to a little over $6 million from countywide property tax proceeds. The bulk of that would cover an additional $4.1 million for the county Health Department's budget, now about $8.2 million, and an additional $1.5 million for Erlanger Hospital's $3 million indigent care funding.

County government should be able to absorb that. The county's average annual tax-revenue surplus has been $8 million for each of the past four years. That $32 million excess has plumped county government's fund balance to a conspicuously hefty $85 million - a level nearly three times the city's $28 million fund balance.

The fairness of the shift is implicit in the fiscal facts behind the so-called 50-50 split in city-county funding under the 45-year-old sales tax agreement, which was last amended in 2001.

Under that agreement, the city had originally allowed $10.6 million in city sales tax proceeds to flow to county government to help fund 10 mainstay agencies. The agreement allowed the county to allocate the city's donated sales tax proceeds as if it were the county government's share of funding for most of these agencies.

But that 50-50 sharing has been an illusion, because the city then also put in its supposed 50 percent share through additional money taken from its city property tax revenue.

As Chattanooga Mayor Ron Littlefield explained to County Mayor Jim Coppinger in a letter last week, "When the city and county splits the cost of anything, city taxpayers are called upon to pay twice: once as a city taxpayer and again as a county tax payer. In the sales tax agreement, we donate local Chattanooga sales tax and again donate city property taxes. Regardless, the natural net effect is that approximately 80 percent of the cost is raised by the sweat of Chattanooga taxpayers."

County government really has no valid grounds on which to object to an end to this unfairness. City taxpayers account for just half of the county's total population - but like everyone else, they also pay county property taxes. So they, and the city's business base, shouldn't have to pay 80 percent of so-called 50-50 splits, while the county's other nine municipalities, and all the 30 percent of Hamilton County taxpayers who reside in unincorporated areas of the county, pay just 20 percent of their so-called 50 percent share.

The best response to the city council's decision would be for county government leaders to pursue a charter for county government that would allow it to craft local ordinances and function properly as the major initiator and funder of the urban county government that the community's looming and long-sought growth now requires.

Such a charter would allow genuine fairness in funding all countywide services through a single countywide tax base for all major consolidated services - i.e., countywide fire, police and public service departments - and vital civic agencies. The municipalities could all opt to keep their charters and control their zoning and land-use plans, but long-term planning and essential public and civic agencies could properly operate under truly fair funding, and tax equity would be assured.