Property tax rates are already expected to go up in local cities and counties because of an unprecedented drop in property assessments.
And additional increases have been approved or are anticipated in budgets that have already passed in Anderson County, Clinton, Oliver Springs, Roane County, and Rocky Top.
Oak Ridge could be the exception. The city could see an increase in the certified tax rate (state officials call it a tax-neutral rate) from $2.39 per $100 of assessed value to $2.52.
So far, no Oak Ridge City Council members have publicly endorsed raising taxes beyond the change in the tax-neutral rate required by the five-year reappraisals completed this year.
Four City Council members, a majority of the seven-member body, said during a budget work session on Tuesday that they will support the $2.52 tax-neutral rate or that it’s important to stay at that rate for now, until they have more information.
The tax-neutral rate is meant to bring in the same amount of revenues after a reappraisal as before. This year’s reappraisals showed an overall 4 percent drop in assessments in Anderson County and a 3.47 decline in Roane County. When overall property assessments drop, the tax-neutral rate goes up.
However, it’s not clear yet what could happen during a special Council meeting on Monday, July 27. Members are expected to discuss the budget and tax rate during that 7 p.m. meeting in the Oak Ridge Municipal Building Courtroom.
At the non-voting work session on Tuesday, two City Council members, Trina Baughn and Rick Chinn, said that, based on what they have heard from city officials, the tax-neutral rate could be lowered two cents to $2.50, and the city would still receive the same amount of revenue in the current fiscal year as it did the previous year.
“I’m more than prepared to battle it out to achieve that $2.50 rate,” Baughn said.
Chinn said the city could lower its tax rate and then charge for services. The city is getting “beat up” because the tax rate is too high, Chinn said.
But other Council members, including Oak Ridge Mayor Warren Gooch, raised concerns about dropping the rate below the tax-neutral rate provided by the state comptroller. Gooch’s primary concern was how a tax rate reduction could affect the tax increment financing, or TIF, already approved for Main Street Oak Ridge, the proposed redevelopment of the former Oak Ridge Mall.
A TIF uses new property tax revenues generated at a site to help cover the costs of public infrastructure. Depending upon how large it is, a drop in the property tax rate could presumably generate lower-than-expected property tax revenues, and it’s not clear how that could affect TIF financing for the proposed 60-acre, $80 million mall redevelopment. Gooch and Council members Charlie Hensley and Ellen Smith all suggested that city officials proceed with caution.
“I think it’s really important that we maintain stability for them,” Smith said of the $13 million TIF plan, citing the possibility that any bank could pull out of the deal. “Right now, it’s really important to maintain stable revenue.”
Gooch, Hensley, Smith, and City Council member Chuck Hope either said they will support the $2.52 tax-neutral rate or that it’s important to stay at that rate for now, until they have more information. Gooch said he was very uncomfortable lowering the tax-neutral rate.
“I will not support a neutral tax rate that is less than the comptroller of the state has sent us, as well as the State Board of Equalization,” Gooch said.
Council member Kelly Callison suggested he would also be opposed to dropping the tax rate to $2.50, and he said there are other options that could be considered that would have a bigger impact on the budget.
The city staff and Oak Ridge Schools had initially requested a combined eight-cent increase in the tax rate. That increase would have been separate from the change created by the tax-neutral rate.
But proposals presented to City Council by Oak Ridge City Manager Mark Watson on Tuesday could allow a budget that does not require a separate tax rate increase.
Among the proposed changes: The city has added in $220,000 in growth over the past five years, the proposed 3 percent salary increase for Oak Ridge Schools could be reduced to 2 percent, $100,000 in requested storm water funding could be dropped, and a $1 refuse collection fee could be added.
If Council approves those changes on Monday, the city could use the $2.52 certified tax rate provided by the state and not require a separate tax rate increase, Watson said.
“It shows good financial management,” he said.
The proposed changes also add about $20,712 in funding for Healthy Start, or about two-thirds of the $31,850 amount that some wanted included in the budget.
There would also be an additional $326,613 transferred to Oak Ridge Schools, raising the transfer from $14.6 million to $14.9 million.
And the budget would include 2 percent pay raises for city and school employees. But that would be 1 percent less than what school officials had requested for teachers and staff.
“I believe that 2 percent is a good level at this time,” Watson said. “That’s also the amount that’s being proposed by the county.”
Chinn said he is very apprehensive about increasing the maintenance of effort for the schools. City officials generally say they can’t lower the maintenance of effort once it’s set. Chinn said increased revenues for Oak Ridge Schools from Anderson and Roane counties, where tax increases have been anticipated in budgets that have already passed, plus an extra $220,000 in growth during the past five years, could actually allow the city to lower its tax rate.
But Watson said a two-cent reduction in the tax-neutral rate would take away half of the $220,000 growth in the past five years.
“I think you want to be careful about taking too much of your growth,” he said, citing new home numbers in Oak Ridge and Anderson County. “Our growth right now is like nothing.”
Also, the city is already “eating” a $700,000 drop in sales tax revenues. Watson has previously said there was a big drop in Roane County, primarily at Oak Ridge National Laboratory.
It’s not clear yet how the proposed changes would affect Oak Ridge Schools. The Oak Ridge Board of Education had requested the equivalent of a 7-cent increase, including for the proposed 3 percent pay raises for teachers and staff.
Watson said there is still about a $650,000 budget deficit for Oak Ridge Schools. But city officials learned this week that the 10-cent tax rate increase approved by the Anderson County Commission on Monday, with eight cents for schools, could roughly generate another $425,000 for Oak Ridge Schools.
Oak Ridge officials said the Roane County budget—which is supported by a 30-cent tax rate increase in Roane County, with 20 cents for school operations—could generate about another $150,000.
But that new Roane County money might mostly be used covering a $125,000 decrease in sales and property tax revenues, according to preliminary information provided by Karen Gagliano, Oak Ridge Schools’ director of business and support services.
Oak Ridge Schools Superintendent Bruce Borchers said education officials will wait to see what happens at the City Council meeting on Monday before determining what to do next. The next BOE meeting is on Monday, August 3.
Each penny on the tax rate now generates about $80,000 in revenue.
The new fiscal year started July 1, and the city is operating under the previous year’s spending levels and tax rate, essentially the city’s version of a continuing resolution.
See Watson’s final budget summary here. It includes a discussion of pay raises, stormwater improvements, the possibility of privatizing the library, the Healthy Start allocation, Oak Ridge Schools repairs, the general fund subsidy of trash services, and a reduction in special events funding.
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