The town of Walden's tax rate is going up by 10 cents in FY2020.

Residents of both towns atop Walden's Ridge will see a tax rate increase in the coming fiscal year, though Signal Mountain has yet to determine how much more its citizens will pay.

Neighboring Walden passed its budget June 11. Included is a 10-cent tax increase, bringing the rate from 0.405 up to 0.505 per $100 of assessed value. For a home worth $400,000, the median home value in the town, that would be an increase of $100 annually.

Walden's total expenditures for fiscal year 2020 are $1,347,651, and total revenues are $1,014,400. The $333,251 difference will come out of the town's fund balance, which contained an estimated $3,700,000 when the last fiscal year ended June 30, according to Town Recorder Fern Lockhart.

The $333,251 coming out of the town's reserves will go toward paving, for which the town has budgeted in excess of $800,000 spread between this fiscal year and last.

Walden saw a 2-cent tax rate increase last year, which Lockhart said was the first increase in the more than 20 years she has been employed by the town.

The increases help to offset the loss of revenue from the phase-out of the Hall income tax, a 6% tax on investments which Tennessee legislators voted in spring 2016 to decrease by 1% each year beginning in 2018 and continuing until 2022.

The loss of the Hall tax revenue averages between $250,000 and $300,000 annually, according to Mayor William Trohanis. Although the Hall tax ends in 2020, Walden will receive the revenue from that year in 2022, he explained.

"Barring any other sources of revenue to replace the loss, we have elected to glide-path our property tax increase with a similar Hall Tax approach (as needed) to offset this reduction in revenue for our Town," Trohanis wrote in an email.

The town of Signal Mountain's tax rate increase will also compensate for the loss of the Hall tax, as well as the expiration of a SAFER grant used pay the salaries of nine firefighters that were hired to staff the town's new fire station.

The budget also includes a 5% raise for employees and about $270,000 worth of paving, the only expenditure that was not in Town Manager Boyd Veal's recommended budget.

In June, Signal Mountain town councilors passed a proposed budget on first reading that included a tax increase of about 33 cents, taking the rate from 1.5665 to 1.9004 per $100 of assessed value.

After a public hearing June 24 that lasted more than three hours, the council requested that staff draft an amended budget. Members will take their first vote during their July 8 meeting on this revised budget, for which the tax rate was reduced to 1.8866 per $100 of assessed value, about a 32-cent increase from last year.

During the public hearing for the previously approved budget, citizens questioned why an overhaul of the town's pay structure was included, as some employees' salaries were increased by 10% to 24% under the new structure.

Veal explained that in the past, the town found itself well behind the norm of what comparable local municipalities were paying their employees, resulting in high staff turnover. Efforts were made in the 2015-16 budget year to increase compensation, but it was determined that ongoing adjustments would be necessary to retain employees.

To arrive at this year's recommended 5% pay increase, Veal said he used various sources, including the University of Tennessee's Municipal Technical Advisory Service salary survey and directly contacting other municipalities, to see how Signal's employee salaries compare to towns of similar size and population.

"In a lot of cases we were well over 5% behind, but I certainly didn't feel anything beyond that was reasonable," he said. "I felt if we made that adjustment then we would remain somewhat competitive."

Because the town was anticipating hiring a new water director at an annual salary of $75,000, some upper-tier department heads were given 10% to 24% raises to align their salaries with that of the new water director position, added Veal.

Councilors requested that the amended budget give all employees a 5% raise, aside from Veal, who did not include a raise for himself in his initial recommended budget. That resulted in a 1-cent reduction to the tax rate of the previously approved budget.

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