Trina Baughn
The problem
This month, the Oak Ridge City Council will establish your property tax rate for 2014 via the approval of our annual city budget. And though it appears that taxes will remain flat, our excessive spending levels are unsustainable and continue to hinder our ability to compete with surrounding communities.
In spite of all the new developments happening as of late, if council approves the budget as proposed, residents and businesses will continue to feel the financial crunch for quite some time. Not only will we retain one of the highest property tax rates in the state, but we’ll also retain one of the largest per capita debt levels in the region. (At nearly $7,000 per person, we have more than four times that of Knox County residents and more than seven times that of Knoxville residents). A dozen more chicken places and grocery store relocations won’t make a dent in the average Oak Ridger’s bills.
If we are to make any kind of progress, we need a strategy that aims to increase revenue while reducing expenditures. This column will focus on increasing our revenue base. I will address budgetary inefficiencies and waste in a follow-up piece next week.
Solution No. 1: Convert city-owned assets into taxable properties
We must first examine our existing assets to distinguish those which produce the highest benefit to the taxpayer from those that do not. The City of Oak Ridge’s most valuable assets are contained within some 17,000 or more acres of non-U.S. Department of Energy land.
Of that land, the city owns approximately 150 parcels, many of which contain neither schools nor city facilities and are clearly more of a liability than an asset to the taxpayer. If we were to sell some of them, we could apply the profit to our debt and use the perpetual new property taxes to reduce everyone’s property tax rate. None of the following suggestions would reduce our 3,448 acres of green belt and parklands; on the contrary, one might argue that such actions would help to preserve those areas.
The most obvious first choice is to sell the golf course. The city borrowed $7.3 million to build it in 1998 and we still owe more than $4 million. Even if we had to sell it at a loss, we’d realize an immediate annual savings of $500,000 of debt service payments that we would otherwise continue paying through 2021.
As I’ve stated before, the city should also cancel its lease with the Oak Ridge Chamber of Commerce and sell our land. According to chamber president Parker Hardy, they pay the city roughly $600 per year to lease the land and “the building will become the city’s should the lease not be renewed.†Given that it is one of the most prime pieces of real estate in town, I’m tempted to personally stick a For Sale sign on the corner and see what kind of response I get.
We also own a vacant building in Commerce Park similar to a $1.5 million building located next door. To my knowledge, it produces neither rent nor any other form of revenue. Allowing it to continue to sit empty is unacceptable.
Finally, the city has accumulated a number of residential properties through a blight acquisition program. Instead of sitting on them indefinitely via a land bank or turning them into community gardens as some have suggested, let’s put them up for auction the day after the properties are razed and return them to a taxable status.
Solution No. 2: Eliminate tax abatements
In addition to city-owned land, there are another 300 parcels that produce little-to-no revenue for the city because of their tax-exempt status. Data is limited because appraisals are not done on most exempt properties. However, the data that does exist suggests that the value of the non-church properties could easily range from $200-$300 million.
At least $100 million of that exempt property is owned by for-profit businesses that have received tax abatements from the Oak Ridge Industrial Development Board via their payment-in-lieu-of-taxes, or PILT, program. The purpose of this program is to boost our competitive advantage and, in turn, boost our economy. However, these arrangements may actually be eroding our tax base.
The selling point of most PILTs hinges on a promised increase of jobs, which are projected to bring in millions of dollars in residual revenue from the new employees. The annual reports of about 10 companies show that only 35 percent of those jobs have materialized and very few of the employees live in our city.
It’s time that the city re-examine this program. That $100 million, if taxed at the full commercial rate, equals at least $1 million in property taxes. That $1 million, if fully realized, is the equivalent of 11 cents on the tax rate. Why not make all of Oak Ridge more financially competitive via a property tax reduction instead of picking and choosing winners?
Solution No. 3: Alleviate forced subsidization of nonprofits
Exempt property owners, their employees, and their patrons receive many of the same services as their non-exempt contemporaries. Our police and fire departments are obligated to respond and assist regardless of whether or not those in need pay for their services. The use of our roads and parks are unrestricted. Visitors and residents alike can walk into our local library and read to their hearts’ content. In other words, those who pay the full tax rate are subsidizing those who do not.
There is a partial solution to this inequity found through a different type of PILT than the one Oak Ridge has typically used. Cities across the country have successfully negotiated voluntary PILTs from exempt entities such as hospitals, universities, and cultural nonprofits. Boston has proven to be the most successful so far. Their city website reports that for 2010, they collected $14 million from universities and hospitals and another $17 million from miscellaneous foundations and organizations.
The notion of collecting PILTs from nonprofits is likely not without precedent in Tennessee since our laws specifically address such agreements. TN Code Annotated 67-5-209 allows for an exempt hospital to “agree to the payment of tax equivalents to the creating or participating governing authority…†Shouldn’t those with the ability to pay do so?
Conservative estimates indicate that there are hundreds of millions of dollars’ worth of untaxed property whose nonprofit owners may be both able and agreeable to similar arrangements. Consider Methodist Medical Center, Oak Ridge Utility District, Tech 2020, Roane State Community College (to whom you recently donated an additional $500,000 to expand their campus), or the University of Tennessee properties. Given their benevolent missions, wouldn’t they want to pay their fair share? We won’t know if we never ask.
Turning ideas into action
When Oak Ridge loses or gains revenue, so do our host counties. Anderson County Mayor Terry Frank recently called for the exploration of “new ways of increasing revenue†and “partnering with organizations to meet these challenges.†The City of Oak Ridge should accept her invitation and also engage Roane County officials in order to identify and convert our shared underperforming assets, examine the necessity of continuing with the IDB program, and negotiate for remuneration from those nonprofits that can afford to pay for some of the services they currently receive at the taxpayer’s expense.
I have instructed our city manager to include these three initiatives on our agenda for the May 13 City Council meeting. I am hopeful that my fellow council members will acknowledge the excessive financial burden that has been placed on our constituents and will be open to taking the necessary measures to alleviate that burden. As with all of our meetings, I will post the results and votes on my website trinabaughn.com.
Likewise, I ask you, our citizens, to make your voices heard. Change won’t happen overnight, but, with your help, it will happen. Contact your elected representatives, submit your own ideas to the papers, and attend our meetings. E-mail addresses for all can be found at cortn.org and ortn.edu. I can be reached directly at [email protected]. Together, let’s ensure a viable, prosperous future for our Oak Ridge!
Trina Baughn is an Oak Ridge City Council member.
Charlie Jernigan says
The land bank is not charted with keeping properties indefinitely. In fact, its guidelines should include putting properties back on the tax rolls as quickly as possible. The City Council will determine the guidelines that our land bank will use.
[email protected] says
You can’t be serious. Lets see what happens with the mall purchase before you go selling off assets. Unfortunatly, once again you have only given out 1/2 truths for the gullable to accept. People please read both sides of the stories before you accept this one.
Denny Phillips says
No offense, but “see what happens with the mall purchase”? Really? It can be almost gauranteed that the new owners will come to the COR asking for tax abatements and infrastructure to which CC will surely trip all over themselves to approve. This makes the above mentioned cost cutting strategies even more pressing.
Charlie Jernigan says
They may, but Kroger didn’t. And if they do the COR will decide what is reasonable to get this valuable asset for the city back on its feet, serving the community’s needs and helping to retain our sales tax dollars here in the city, relieving pressure on our property taxes.
Denny Phillips says
And by COR, I feel certain you mean the tax paying citizens, not the ruling elite that worked out the last abatements for Steve Arnsdorff that funded the buildings dilapidation.
Charlie Jernigan says
You may remember it differently, but I recall that the approved infrastructure was never acted on and was withdrawn since the proposed plan died of neglect. But the rugged individualist and famed capitalist Mr Arnsdorff sold off some of the intrinsic value of his property to Walmart, dispatched all of the minor tenants, thereby reducing his property tax burden, and was able to operate at a profit with just the 4 remaining “anchors” until Sears left due to the reduced customer traffic after the closure of the mall.
I don’t see why people who live outside of a city, while taking advantage of its amenities feel that the duly elected government of said city are a ruling elite just because we as a community work for our common good. Isn’t that what a 501(c)(8) organization does?
mary connolly says
Mr. Jarnigan
Well said !
Ck Kelsey says
NOT really. it’s prejudice against OR business owners that ave been paying full Tax bills for years.
Denny Phillips says
It is interesting that you should draw the parallel. There are subtle differences between 501(c)(8) organizations and governments. For instance, one may choose whether or not he/she wants to belong to such an organization by either participation or dues. For instance, at the organization I work for, should leadership choose to spend money recklessly, negligently incumber its members with debt, exempt certain members of the organization from dues while forcing others to absorb the costs, those members can simply choose not to renew their membership and opt out of paying dues.
Also, at the 501(c)(8) organization I work for, officials may receive no monetary compensation for their work and are term limited. Members of our organization may not suckle at the teet of the general fund, draw health insurance from it, or hire their cousin to work there. Likewise, officers at the organization may not use organizational resources to further their own private interests/businesses and are ineligible to do “for pay” work for the organization.
Lastly, when our organization identifies impoverished individuals in the community, we bring their family food, clothing and assistance rather than bulldozing their property.
Denny Phillips says
And Chuckles, if you don’t want my input, stop sending me a property tax bill. Until then you are what is commonly referred to as “SOL”.
Ck Kelsey says
That sound s Fair to me Denny ! BTW Charlie, you should STOP stating that people who pay OR CITY Taxes have no say in the matter of how they are wasted or spent or forgiven to certain entities. You DO sound elitist when you say those type of things.
“They Love our milk and honey but they talk about another way of living” Merle Haggard
Denny Phillips says
It should also be noted that, judging by the growth of Farragut, LC, Harden Valley and Kingston, there are many members of your community that are choosing not to renew their membership.
Charlie Jernigan says
From your description of your local organization, I’m sure it is wonderful and serves the common good of its members and people contacted by its charity work.
But you choose to dwell on the differences and are not the similarities of a city working for the common good of its citizens and those who may pass through its borders.
But if your organization is more than a local entity, it certainly has paid people up the organization and certainly some of those people, perhaps even some at the very top, have been disappointing like Mr Arnsdorff was in his dealings with the city. But none of that changes the basic thrust of working for the common good at some level and in some ways. Sometimes it works better than others and there are corrective measures to try for a better future.
Those of you who do not live here naturally do not have the same impressions of the benefits that those who do choose to live here do. But you do choose to work here and participate in serving our residents and those who arrive at your business from out-of-town on our streets. And you do have access to our political system, but not the ultimate access that a citizen does.
So when you say we are governed by a ruling elite, we know that you are saying something that is at its heart elitist itself. You are saying that there is something fundamentally wrong with the government we selected without doing what the rest of us do. We live here and we voted. And because you choose not to, that’s really your problem and not ours.
Sam Hopwood says
I seem to recall that the COR has already extended an open-ended offer for any action that a new Mall owner would desire. All that remains is for any new owner to tell the city the amount that they want and the rest is a foregone conclusion. It’s too late to hold on to our wallets. Oh, and I have been a resident of OR forever, well, almost…
Denny Phillips says
This is like hard-core porn for people who love common sense.
Denny Phillips says
I mean what brash concepts! Everyone pays taxes! And the municipality stops engaging in private enterprise and returns to providing only mandated services!
Charlie Jernigan says
What do you mean when you say “mandated services”?
Denny Phillips says
Required by law.
Charlie Jernigan says
Including a city council resolution?
Denny Phillips says
Trina:
I serve as the Government Relations Chairman for an area 501c(8). The State Board of Equalization negotiated our tax rate at 50% of the assessed value with the understanding that half of our property is used for retail activity and half is used for charitable activity.
I propose a simar approach be taken some of the aforementioned non-profits, i.e. assessing property taxes at RSCC on the retail portion (bookstore, cafeteria) or at MMC on their retail space (similarly their cafeteria and gift store) pro-rated based on square footage of these spaces.
Charlie Jernigan says
Since retail property taxes are related to the volume of business and not necessarily the square footage, my impression is that any suggested in-lieu-of-tax rate should correspond to a for-profit with similar sales after accounting for any of the retail transactions that the non-profit organization might provide as benefit to employees.
This methodology is related to the drop in property taxes for the OR Mall when most of the tenants left even though the physical mall had not changed.
Bill Issel says
Ms. Baughn stated, “The selling point of most PILTs hinges on a promised increase of jobs, which are projected to bring in millions of dollars in residual revenue from the new employees. The annual reports of about 10 companies show that only 35 percent of those jobs have materialized and very few of the employees live in our city.”
There was a huge investment made by Subaru in Indiana that got me thinking. If there was a way to do something similar to the Indiana deal, that might be a bigger incentive for the companies who promise jobs to deliver.
“The Indiana Economic Development Corporation offered Subaru up to $9.5 million in conditional tax credits and up to $500,000 in training grants. The company can’t claim those incentives until it makes good on its promises for job creation.”
I’m not the most experienced guy in this whole concept, and Oak Ridge doesn’t have anything on this scale, but I thought it was food for thought.
Mack Bailey says
I’ll favor selling the golf course when Bissell Park, the Recreation Center, the soccer, baseball, and softball fields, greenways and greenbelts are put up for sale.
Sam Hopwood says
I might be inclined to agree with you IF the city had borrowed many millions to pay for those little amenities as the city did with the golf course. BIG difference. You do recall, I’m sure, that using capital outlay notes to finance that little adventure – to avoid a referendum – cost four city council members and the city manager their jobs at the next city election. Sell the golf course. You will still be able to play under a private ownership and might even see a city tax reduction. A win, win situation.
Steve Frank says
Not being a resident or tax payer ofOak Ridge I really have no business commenting, except for the fact that there are people pushing to adopt your policies else where in Tennessee. The theme of government regulates everything, is very popular amongst bureaucrats and the left leaning folks and that includes Governor Haslam.
Land banking may be a good idea in concept but it stinks in reality. The vast majority of land bank systems are designed to transition private property to government owned property.
Economic growth doesn’t mean what most people think it does, it is simply government regulated and government funded growth.
Greenbelts do more good for creating government jobs than they do for the environment. Sure property values will increase because there is less property to be had and these Greenbelts take money from the tax base.
You proudly trumpet you membership in ICLEI (in all reality ICLEI, is a NGO of the United Nations) and Smart Growth, aka Sustainability is a fancy way of saying, we want our communities to look like Europe. All this stuff is great if Oak Ridge wants it, however don’t expect others move there.
Lastly, for the folks that may be interested: In June 1998, J. Gary Lawrence, an adviser to President Bill Clinton’s Council on Sustainable Development, former director of the Center for Sustainable communities at the University of Washington, and chief planner for the City of Seattle, told a London audience:
“Participating in a U.N. advocated planning process would very likely bring out many of the conspiracy-fixated groups and individuals in our society, such as the National Rifle Association, citizen militias and some members of Congress. This segment of our society who fear ‘one-world government’ and a U.N. invasion of the United States through which our individual freedom would be stripped away would actively work to defeat any elected official who joined ‘the conspiracy’ by undertaking LA21 (Local Agenda 21). So, we call our processes
something else, such as comprehensive planning, growth management or smart growth.†http://watchdog.org/37046/ks-local-planning-initiative-has-federal-strings-un-roots/
…. and thems just the facts folks.
“In fact, a fundamental interdependence exists between the personal right to liberty and the personal right in property. Neither could have
meaning without the other. That rights in property are basic civil
rights has long been recognized.†[U.S.Supreme Court: LYNCH v. HOUSEHOLD FINANCE CORP., 405 U.S. 538 (1972)]