Hamilton County's tax delusion

Hamilton County's tax delusion

April 19th, 2011 in Opinion Times

Hamilton County officials' reactions to the city's decision to let the sales tax agreement expire are a bit extreme. County officials are acting as if they will lose all of the $10.6 million that the city has been letting county government have to distribute under the agreement. Yet the city has promised to keep paying for at least half of the services - and probably more - that have been funded under the agreement. And city taxpayers, through their county property taxes, will still pay more than half of the balance that will fall to county government in the next budget year. So what's the county complaining about?

Good question. The answer is, county officials are complaining mainly because they are about to lose a sweetheart deal that has let them look like they were leading a responsible government, when in fact county government hasn't carried its rightful share of the county's development or civic needs for decades.

Here's why. Every time the city splits funding with the county government for any given project, residents and businesses in the city of Chattanooga end up paying twice - first with their county taxes, and again with their city taxes. In fact, because city residents constitute half the county's population, and because the lion's share of commercial property is also in the city, Chattanooga taxpayers ultimately pay about 80 percent of the total cost of so-called 50-50 splits. That's blatantly unfair.

If the county's other municipalities shared fairly in the expenses of city-county deals for economic development and civic needs, that equation would change. But the governments of Lookout Mountain, Signal Mountain, Red Bank, East Ridge, Soddy-Daisy, Collegedale, Walden, Lakesite and Ridgeside have rarely volunteered to pay a share of the so-called city-county 50-50 splits. (The share that East Ridge, Lookout Mountain, Red Bank and Signal Mountain have paid in the expiring sales tax agreement is minuscule.) Nor do the residents of the unincorporated areas of the county - about 30 percent of the population - volunteer to pay their fair share of a city-county 50-50 split.

So when the city and county split the $40 million cost of the "yellow brick road" to link Volkswagen and the jobs it spawns at Enterprise South with I-75, and the $6 million emergency center there, residents and businesses of Chattanooga didn't pay just their half of the $46 million cost. They paid nearly $37 million, leaving the other half of the county's residents and businesses to pay just $9 million.

Such gross inequity matters. County officials will jump up to claim that county residents outside of the city at least contribute mightily to the city's sales tax revenue. True, but it is city residents and businesses that also must pay necessarily higher taxes for the higher level of infrastructure that is necessary to support and attract commercial development. This infrastructure includes 24/7 fulltime fire service, more intensive policing, commercial grade sewer mains/storm-water runoff and garbage service, more city roads and traffic signals and ordinance enforcement.

County government officials won't seek a county government charter or home rule authority to provide such services, so they can't write or enforce municipal-style ordinances, or even hang a traffic signal without state approval. They don't even enforce a state law that requires county government to create fire-service districts, and their road service and sheriff's department expenses, though supported by countywide property taxes, are provided only in unincorporated areas of the county.

What county government and county commissioners have done, conversely, is help perpetuate a myth that the county mainly represents county residents who live in unincorporated areas, and those residents need not bother to pay urban level property taxes for the services they use. They imply that it is the right of residents of unincorporated areas particularly - and somewhat so for residents of municipalities outside Chattanooga - to free-ride on the city's services and infrastructure for jobs, transportation, entertainment and shopping. And they implicitly suggest that county government won't spoil that illusion by establishing countywide tax equity and raising the countywide property tax sufficiently to pay for appropriate countywide services.

Indeed, though Chattanooga city residents constitute either all or the majority of the residents of six of the nine county commission districts, county commissioners blithely continue to give Chattanooga and other municipal residents the shaft on taxes. And they compound that inequity by raising a ruckus if the city or other municipalities try to annex their natural growth-boundary area tax base.

Worse, their anti-tax, anti-equity policies continue to spur more residential building in the unincorporated areas of the county, which just aggravates these tax inequities. The county's misappropriation of the Volkswagen-related PILOT funds - payments in lieu of school taxes - that should go to operating funds for county schools is similarly glaring. It compounds the waywardness of their myopic leadership.

This is no way to run a county that is poised to rapidly urbanize in the unincorporated areas in the near future. If county officials fail to secure home rule authority or a county government charter (Knox and Shelby counties have the latter), the wave of expected growth here in the next 10 years will create a chaotic and unmanaged sprawl. Without urban style ordinances and planning, a sufficient tax structure and forward-looking leadership, tax equity and countywide revenue problems will only worsen. Hamilton County residents deserve much better.