A competing tax plan on the Chattanooga City Council’s agenda next week would result in layoffs across departments, scaled-down constituent services and the elimination of accounting and internal auditing staff, Mayor Tim Kelly’s office argued in a statement Thursday.
Council member Chip Henderson of Lookout Valley has suggested a tax rate of $1.69 per $100 of assessed value, an increase over the certified rate of $1.55 but less than the $1.93 rate advanced by Kelly’s office. Both options would increase pay for police and firefighters, but Henderson’s proposal does not include a series of other items the mayor’s office hopes to fund.
Kelly spokesperson Eric Holl said Henderson’s “slash-and-burn plan” is the worst of both worlds. It makes painful cuts to city services and would still result in a significant increase in property tax bills, Holl said in a press release.
(READ MORE: Chattanooga police, firefighters pack council chambers)
“The Kelly administration does not believe it is responsible to cut road paving, 311, violence prevention and the new fire company that would serve East Brainerd,” Holl said. “We are asking council to support Mayor Kelly’s compromise $1.93 plan, which raises enough revenue to combat the rampant inflation since Mayor Kelly took office in 2021 while still funding critical services.”
In addition to raising the tax rate to about $1.69 per $100 of assessed value, Henderson’s proposal would also make a series of cuts to city departments. However, public works, parks and recreation, police, fire and the Department of Community Development wouldn’t be affected. This would enable the city to reserve about $23 million to fund raises for police and firefighters. That amount includes $5 million that was previously set aside by officials.
PROTECT TAXPAYERS
In a phone call, Henderson said his goal all along has been to protect taxpayers. Constituents in his district have said they want to see pay raises for fire and police while making cuts in spending, he said, while several people have told him they’re not opposed to a moderate tax increase.
When the City Council passed the current budget in June, Kelly indicated it put the city on a solid foundation, but officials would need to specifically address fire and police pay at a later date, Henderson said.
“Public trust in elected officials erodes when we say one thing and then we do another,” Henderson said, “and this administration has from the very beginning said that we were addressing fire and police pay. I have told my district from the very beginning that we have to do something about fire and police pay.
“And that’s exactly what I’m doing. I’m addressing fire and police pay,” Henderson continued. “Because that’s what we said we were going to address. They (the Mayor’s Office) have made this incredibly more difficult than they needed to by the way they’ve gone about this.”
Henderson’s proposal drew criticism from his colleagues because it included blanket reductions to department budgets as opposed to identifying specific line items. However, Henderson said it would be better for department leaders to pinpoint where those cuts should occur so they have the least possible negative effect.
The Mayor’s Office argues Henderson’s plan would make mid-year budget cuts to city departments. It would also defund an expansion to the city’s violence prevention effort and make cuts to job training programs that reduce crime and help Chattanoogans escape poverty. The city would also not be able to hire technology staff that would protect Chattanooga from cyberattacks, which exposes the city to ransomware threats and puts personal data at risk, Kelly’s staff said.
Kelly’s $1.93 rate would fund $7.5 million for road paving, $2.5 million to staff Fire Station 21 in East Brainerd, $1 million for rent assistance and eviction prevention funding and $2 million to address a backlog in parks maintenance, among other items. Those priorities would be cut under Henderson’s proposal, Holl said. The Fire Department has been requesting the additional fire company for years to eliminate a 15-minute gap in fire response in the area, Holl said.
“Station 21 is strategically located in a growing part of our city, but it only has an engine,” Jack Thompson, president of the Chattanooga Firefighters Association, said in a post on social media. “That means families are waiting 10 to 15 minutes for the nearest ladder or backup engine. Adding Ladder 21 through the fiscal year 2026 budget amendment will save lives, protect property and keep our firefighters safer on the job.”
If one of his colleagues brings forward an amendment next week, Henderson said he would be supportive of additional funding for a ladder truck and more personnel for Fire Station 21.
In an email, Police Chief John Chambers pointed out that Henderson’s plan also does not provide funding for additional police vehicles. This is needed due to a decision in 2021 to cut the department’s vehicle budget by 50%, Chambers said.
The cost of a single police SUV in 2021 was $40,000, which has since grown to $70,000. When the September academy hits the streets, Chambers said, the department will have not have vehicles for recruits to drive.
‘FEAR-MONGERING’
The co-sponsor for Henderson’s proposal, council member Jeff Davis of Hixson, said it’s unfortunate to see the mayor continuing to engage in “fear-mongering and deceptive messaging” to distract from the issue.
In a post on social media, Davis said Henderson’s alternative proposal would have been unnecessary if the Kelly administration had helped find efficiencies in the budget and focused his budget proposal on police and fire raises, which Davis said was a promise from the administration.
“And despite abandoning his earlier commitments and refusing to engage with willing members of City Council in an effort to lessen the property tax burden on Chattanooga residents, the mayor somehow believes he has presented a ‘compromise plan,'” Davis wrote.
The proposal by Henderson and Davis provides the same funding for police and firefighter raises as Kelly’s plan.
“The truth is that our plan will not force layoffs and cuts in city services unless the Kelly administration chooses those outcomes, rather than readjusting city spending to make do with the reasonable amount of additional tax revenue provided by our proposed millage rate,” Davis said. “The truth is that our plan strikes an appropriate balance between giving much-needed raises for our first responders and minimizing the tax burden on hardworking Chattanoogans.”
Kelly’s former chief operating officer, Ryan Ewalt, has also weighed in on this debate, saying in an email that residents and businesses cannot afford the tax increase that would result from the mayor’s plan. Ewalt said he would prefer to see officials scrap the proposals and restart.
If that’s not possible, he would prefer Henderson’s proposal because it’s a lower tax rate and would result in a lower impact on taxpayers. However, he’s not convinced $1.69 is the lowest tax rate possible.
“I think a much more minimal tax impact — if any — is possible,” he said. “There is unnecessary confusion and a choice between two bad options because this year’s budget process was broken and full of spin.”
(READ MORE: Chattanooga mayor unveils reduction in proposed tax rate)
Police officers and firefighters should absolutely receive appropriate pay, Ewalt said. In order to accomplish this, officials should first remove everything from the tax increase that was not communicated up front. The plan should only include fire and police pay raises and nothing else, he said.
‘BACKSEAT DRIVING’
In an email, Holl said Ewalt did not work for Kelly when city government last set a property tax rate following the 2021 reappraisal. In 2021, the City Council exceeded the certified rate in order to fund significant police and fire pay raises, infrastructure improvements and pay for city employees.
“During Mr. Ewalt’s time at the city, he was only helping decide how to spend that revenue that was raised in 2021 before his arrival, and none of the budgets produced during his time as (chief operating officer) contained the significant service cuts he is now advocating for,” Holl said.
Inflation of more than 22% has affected the city budget in recent years, Holl said, with even higher cost increases on key city purchases like diesel, asphalt and vehicles.
“Mr. Ewalt also was not here during this year’s budget process, when numerous cuts and efficiencies were found and implemented to produce a balanced budget despite inflation, including an actual effective review of vacant positions,” Holl said. “Unfortunately, Mr. Ewalt has also been given incorrect information about this process.
“In short, Mr. Ewalt is engaging in backseat driving on roads he knows nothing about,” Holl said.
The council will consider the mayor’s certified rate on the first of two required votes Tuesday. The panel will also hold a public hearing on the competing proposal advanced by Henderson and Davis on Tuesday.
Chattanooga’s property tax rate is now 2.25% annually of assessed property value. However, when properties are reassessed for tax purposes — as they are every four years in Hamilton County — the state requires local governments to lower their tax rate to a new “certified rate” that won’t create a windfall of new tax revenue.
The city’s new certified rate is 1.55%, meaning 1.93% is a reduction from the current rate and an increase from the certified rate. Annual property taxes on a $300,000 home would be $1,162.50 at the certified rate and $1,447.50 at the 1.93% rate. At 1.69%, the annual taxes on a $300,000 home would be $1,267.50.
Contact city and county reporter David Floyd at dfloyd@timesfreepress.com or 423-757-6249.
