Chattanooga’s mayor and City Council members have not raised the property tax, the city’s chief source of revenue, for eight years — a far cry from the old standard of a tax increase every four years to keep up with inflation in costs. To make do in the interim, city leaders have squeezed services, left vacancies unfilled, restricted wages and broken commitments to fund projects they had pledged to support.
That approach cannot be continued without significant layoffs, which now would fall mostly in the police department. In short, it looks like a tax increase will be necessary this year.
Chattanoogans will not know Mayor Ron Littlefield’s specific budget proposal until May 18. Yet given the now-standard critical rant against any and all tax increases, it’s a fair guess that the knee-jerk reaction among many residents may be negative.
Before people adopt that fact-conflicting mindset, it would be wise to consider the specifics of the city’s budget and the difficulties that a status quo budget would entail — much less the grim results of an actual budget cut.
The city’s revenue has been dramatically squeezed since the last tax increase on Sept. 11, 2001. And, no, increases is some tax bills due to reappraisals on existing homes do not result in higher revenue overall to the city.
Residents must remember that countywide property reappraisals must conclude, under state law, with a revenue-neutral tax rate on existing property, which is why the actual tax rate typically falls after reappraisals (i.e., from $2.2020 per $100 of valuation to $1.9386 in 2007 after the last reappraisal). While property values may increase dramatically in some areas of the city (North Chattanooga is one example), those values are offset, in the summary total, by declines elsewhere. The end result is a state-certified, revenue-neutral tax rate on existing property at the end of a reappraisal year.
With tax-creep wrung out of the reappraisal system for decades, the only revenue gain from property taxes comes from the new year’s growth — and that rarely pays for expanding services to accommodate growth.
In the past three years, moreover, the real revenue-and-growth curve has dropped off a cliff. Yet costs due to inflation in vehicles, maintenance, gasoline, materials, purchasing and personnel costs — for benefits and wages — have all continued to climb.
The city’s commitment to issue bonds to finance promised infrastructure costs and incentives for the Volkswagen and Alstom plants and related industrial development has also taken a substantial bite out of the budget. Other new costs include a promised new firehall and personnel at Enterprise South, the industrial park that will house Volkswagen and a raft of related supplier plants.
Thus the city for the past two years has been forced to dip into its reserve fund for about $5 million each year to balance the budget. That can not continue: It’s not sustainable over the long term, and it undermines the city’s bond rating, which would soon result in a marked-down rating and higher interest costs.
In any event, the budget scenarios laid out by Mayor Littlefield over the past week argue overwhelmingly for a long-overdue tax increase.
To keep just the status quo budget of $172 million, the mayor says he would have cut current 51 employees, including 49 sworn police officers.
To cut the budget by 5 percent, he projects cuts of 109 employees, including 85 sworn police officers, 10 Public Works and 10 Parks and Recreation employees. In addition, he would shut down city buildings on Fridays and go to four-day work weeks, which suggest weekly furlough cuts that would translate into wage cuts and significant reductions in service.
Alternatively, Mr. Littlefield proposes consideration of a $197 million budget, which would largely restore city government services to the level they were a few years ago but surely is negotiable.
City officials reasonably seem adverse both to budget cuts and a status quo budget, which effectively amounts to more insidious cuts. Several council members suggest they are open to raising revenue, though hopefully through increases in such areas as a wheel or car inspection tax.
Such alternatives are not really feasible, and council members shouldn’t fool themselves by restricting their decision to such wishful thinking. The alternatives to an increase — reduced policing when we need more, and more mindless grinding down of other essential services when the city is on the brink of a growth wave and most needs critical investments — would be recklessly penny-wise and pound-foolish.
If city officials may need more spine to do the right thing, they should go looking for it now. This is no time to wreck the city’s chances of maximizing opportunity. It just doesn’t knock that often.