Guest column: Budgeting and property taxes, why are we different?

By Leonard Abbatiello

As a matter of convenience to the Oak Ridge Board of Education, the city is getting ready to change the budgeting cycle and the Oak Ridge property tax due and delinquent dates. The city-proposed changes are only a partial band-aid. No one has considered the taxpayer, or the impact of what is best for everyone. 

Early in Oak Ridge’s municipal history, the city had the State of Tennessee legislature pass a private law and a local ordinance which made it possible for Oak Ridge to tax its businesses and citizens much earlier than any other government in Tennessee. It was cash-flow strapped and it then sought state relief to force earlier federal payments. This created a budget cycle that required Oak Ridgers to pre-pay property taxes rather than pay-as-you-go, which happens in the rest of Tennessee.

Today, Oak Ridge is the only Tennessee government which sets its budget and property tax rate in May, its tax bill payments due date is June 1, and the late tax payment date now is July 31 annually. This makes us pre-pay our property taxes and forces early budget decisions.

Every other Tennessee government uses the same budget year, but they set their property tax rates in August, their tax bill payment due date is Oct. 7, and the late tax payment date of Feb. 28 the following year. In other words, everyone in Tennessee, except Oak Ridgers, have five more months to pay their property taxes, and they can pay two years taxes in alternate calendar years accruing significant federal income tax deductions.

Over the years, the preponderance of Oak Ridge revenue sources have changed from federal sources to privately paid tax bills and state payments. During the last 10 years, Oak Ridge municipal and schools have been incorporating padding into their budgets, which has resulted in both bodies accumulating significant bank accounts from this budget padding/underspending. Today, both bodies have significant cash buffers, which they are continuing to grow. The need for early tax bill payments has diminished over time, and Oak Ridge no longer needs a unique budget/tax cycle.

Oak Ridge needs to adopt the same budget cycle, property tax payment, late due dates as are utilized by everyone else in Tennessee. There are significant advantages for all of Oak Ridge:

1. Oak Ridge budgeting cycles will sync with the state, educational process, and grants approval processes.
2. Businesses and citizens do not have to pre-pay taxes and have another five months to pay.
3. Citizen tax year “packing” is possible biannually reducing federal income taxes.
4. It fits the property equalization hearing schedule better. Everything then meshes with Tennessee. Today, Oak Ridge has no justification to be different!
5. Budgets will be more accurate and budget padding unnecessary. For its first 40 years, budget underspending was about 0.5 percent annually. Today, budget padding/underspending is amounting to about 3 percent of our property tax-paid expenditures.

There is a potential to save property taxpayers a minimum of $1.5-3 million dollars annually. This savings amounts to 17 to 34 cents on the tax rate if it was passed along to us taxpayers. This can be accomplished for a cost of less than $15,000 in one-time interest losses. The near-painless way to accomplish this is to change the critical dates by one to two months yearly for three consecutive years until we match budget/tax payment cycle of everyone else in Tennessee. Everybody wins! Let’s fix it right and join Tennessee!

See Abbatiello’s “A Comparison of Budgeting Elements” here: A Comparison of Budgeting Elements.

Leonard Abbatiello is a former Oak Ridge City Council member.