Note: This story was last updated at 10:05 a.m. July 28.
There will be a $3.50 increase in the monthly trash fee, and more money—$260,000—will be reserved for capital projects such as buildings and schools, while city officials are not expected to change the new property tax rate provided by the state after five-year reappraisals completed this year.
The trash fee will increase from $7 to $10.50 per month. That change is expected to provide another $335,000 per year in revenue.
The new tax rate—state officials call it a tax-neutral rate—is $2.52 per $100 of assessed value. It was approved in the first of two readings by the Oak Ridge City Council during a three-hour special meeting on Monday. The second reading hasn’t been scheduled yet, but the meeting is expected soon.
The new tax-neutral rate is up 13 cents from the previous $2.39. That’s because overall property assessments went down in Anderson and Roane counties. The tax-neutral rate is designed to bring in the same amount of revenue after a five-year reappraisal as before, so when total property assessments go down, the rate goes up.
The Oak Ridge City Council can make changes to the tax-neutral rate by raising it or lowering it. But a proposal to reduce the tax rate to $2.50 failed on Monday.
Oak Ridge has proved to be the exception among some local cities and counties that have either raised their tax rates or approved budgets that anticipate tax increases above the change in the tax-neutral rate. Among those that have approved increases or approved budgets that anticipate them are Anderson and Roane counties, and Clinton, Oliver Springs, and Rocky Top.
The budget that passed Monday includes 2 percent pay raises for Oak Ridge municipal staff members. It’s meant to provide enough money for 2 percent pay raises for Oak Ridge Schools teachers and staff—rather than the 3 percent they requested—but it’s not clear yet how the municipal budget passed Monday will affect the schools. The Oak Ridge Board of Education, which has already proposed dipping into its fund balance, will meet on Monday, August 3.
“I think what you see here is good collaboration between the city and schools,” Oak Ridge Schools Superintendent Bruce Borchers said. He said educators appreciate the roughly $325,000 increase in the amount transferred from the city to the schools, which totaled about $14.9 million.
The schools had initially requested the equivalent of a seven-cent tax rate increase, and the municipal staff had requested a one-cent increase, or eight cents total.
But the budget proposal discussed and considered by City Council last week and this week included some revisions by Oak Ridge City Manager Mark Watson and some new revenues, including from the anticipated tax rate increases in Anderson and Roane counties. Among the changes: adding $220,000 in growth during the past five years; removing $100,000 for storm water funding; and reducing the amount for educator raises from 3 percent to 2 percent, shaving about $325,000 from anticipated expenses.
In another significant change, the 10-cent tax rate increase approved by the Anderson County Commission on July 20 is expected to generate another $423,000 for Oak Ridge Schools.
The new revenues of about $115,000 from the anticipated 30-cent tax rate increase in Roane County are expected to be about a “wash” because of an expected decrease of $120,000 based on actual receipts from fiscal year 2015, said Karen Gagliano, Oak Ridge Schools director of business and support services.
Watson had initially proposed a $1 increase in the trash fee starting in November as city officials begin transitioning to a user fee system for garbage pickup. It’s now heavily subsidized by the city’s general fund, which city officials say is unusual. The extra $1 was expected to generate another $95,000.
But Oak Ridge City Council member Rick Chinn proposed doubling the trash fee, raising it from $7 to $14. He said $7 of the service is now being subsidized by the city’s general fund, where it affects the property tax rate.
“Let the users pay for the trash pickup,” said Chinn, who advocated for lowering the tax rate to $2.50. “We are compared daily to our competitors. Make it a user fee.”
But after further discussion, Chinn and four other City Council members voted for the smaller $3.50 increase in the trash fee. Joining Chinn in voting in favor of it were Oak Ridge Mayor Warren Gooch and City Council members Kelly Callison, Charlie Hensley, and Chuck Hope.
Voting “no” were Mayor Pro Tem Ellen Smith and City Council member Trina Baughn.
Smith had objected to the larger proposed $7 increase, saying it would be an unexpected burden on the lowest-income residents and she didn’t want to increase the fee all at once, especially without notice, while Baughn said it was taking more money from residents.
In a subsequent motion, Chinn then tried to reduce general fund spending by $335,000—equal to the amount of new revenues provided by the higher trash pickup fee—but that proposal failed.
Baughn and Chinn voted in favor, but other Council members voted “no.”
Those who did not want to reduce general fund spending said there are some unmet capital project needs, including in the schools and city, with several citing roads as an example.
“We need to keep up with some things that we’ve deferred over the years,” Smith said.
A motion by Baughn to reduce money for expenses related to the Oak Ridge Chamber of Commerce from $175,000 to $90,000 failed because it did not get a second. Another motion by Baughn to cut the city manager’s budget by $85,000, the equivalent of one penny on the tax rate, also failed.
Baughn also proposed reducing the amount transferred from the city to the schools to about $14.6 million, the same amount as in the fiscal year that ended June 30. Voting in favor were Baughn, Chinn, and Smith. The others voted “no.”
The motion by Smith to appropriate $260,000 to the capital fund to accommodate projects like those Council had been discussing passed 5-2. The two “no” votes came from Baughn and Chinn.
Baughn and Chinn also cast the only two votes in favor of reducing the tax rate to $2.50. Chinn said that rate was revenue-neutral, and Baughn has said taxpayers are “getting squeezed from all sides.”
But other Council members had expressed concern about reducing the rate below the tax-neutral rate recommended by the state. They said they were worried about doing anything that could have a negative impact on the tax increment financing, or TIF, for Main Street Oak Ridge, the redevelopment of the former Oak Ridge Mall. A TIF relies on new property tax revenues generated at a site to help cover public infrastructure costs.
Voting in favor of adopting the $2.52 tax-neutral rate provided by the state were Callison, Gooch, Hensley, Hope, and Smith. Baughn and Chinn voted “no.”
Hensley had said he would favor an even higher rate for more money for roads.
Each penny on the tax rate generates about $85,000. Chinn said a one-cent decrease in the tax rate might not mean much to a small home owner, but it would mean a lot to commercial property owners who own many properties.
“I’m not just talking about myself,” Chinn said.
Monday’s special meeting was actually a set of special meetings, one to approve the city’s budget on second and final reading and the other to adopt the tax rate on first reading.
More information will be added as it becomes available.
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